2011 European fraud survey Presentation of Romania findings June 2011.

2011 European fraud survey

Presentation of Romania findingsJune 2011

2011 European Fraud survey

Survey approach and participant profile

Between 4th January and 1st February 2011, our researchers conducted a total of 2,365 interviews with employees in 25 European countries either online or by telephone in the local language. Participants were employed in companies with over 500 employees, stock exchange listed or multinationals. Overall 104 interviews were conducted in Romania, profiled as follows:

Number of employees globally %

Above 5000 34

1500 – 4999 24

1000 – 1499 22

500 – 999 20

250 – 499 0

Less than 250 0

Not available 0

Role within organization %

Board director 0

Senior management 9

Other management 21

Other employees 70

Throughout the report comparisons are made to respondents in Emerging Markets: the Baltics (Estonia, Latvia and Lithuania), Croatia, Czech Republic, Hungary, Poland, Romania, Russia, Slovakia, Turkey, Ukraine; Mature Markets: Austria, France, Germany, Greece, Ireland, Italy, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, UK and to the overall European findings.

Please note that, due to rounding, some figures may not sum to 100%

Summary


► Business conditions are improving in Romania, where respondents think that there is less pressure to reduce costs (52%) and make redundancies (31%) than two years ago.

► However companies must guard against complacency, as 86% of those surveyed in Romania still think that more companies will get into financial difficulties over the next year (93% in 2009), which is considerably higher than across Europe as a whole (64%).

► With the shift away from cost cutting, there is even more focus on boosting profits – with the number of Romanians feeling under pressure to increase profits doubling since the last survey (26% vs 12% in 2009).

► A substantial 59% of employees believe management will cut corners to meet performance targets. This view is not shared by management respondents, with just 29% of those surveyed saying that they would consider cutting corners (much lower than across Europe, 50%).

► 23% of management would offer personal gifts and services to win or retain business, and 23% would offer cash payments.

► 15% of employees think it acceptable to misstate accounts.

► Over half consider the economic downturn to have increased the level of corrupt practices. A substantial 88% believe that bribery or corrupt practices are widespread in Romania, significantly higher than across Europe (62%).

► 16% of Romanian companies surveyed have experienced a significant fraud within the last two years (Europe 16%)

Summary (cont’d)


► Despite a third of Romanian respondents reporting an increased focus on anti-fraud efforts at their companies, awareness of specific anti-fraud measures is lower than in 2009 – particularly for expenditure controls (43% vs 67% in 2009) and confidential reporting lines (9% vs 27% in 2009).

► However, more respondents in Romania have received anti-bribery training (41%) than any other country surveyed. Consistent with the overall findings, code of conduct, tone from the top and the communication of clear penalties are also key elements of corporate anti-bribery culture in Romania.

► With bribery and corrupt practices considered to be widespread in Romania, 72% of respondents believe there is a real commercial advantage to having a strong reputation for ethical behavior. Furthermore, the majority say they would be unwilling to hire suppliers that have been involved in a major bribery or corruption case (64%, 53% across Europe).

► Demand is growing for greater regulatory supervision in Romania to reduce the risk of fraud, bribery and corruption - up to 89% from 81% in 2009.

► However, respondents are skeptical of regulators, believing they are unwilling to prosecute bribeyr and corruption or ineffective in doing so. Many of these respondents think that bribery and corruption are too widespread (74%) and that regulators do not wish to damage businesses during the economic downturn (41%).

► 79% of respondents in Romania think that the kind of compensation package offered by the Dodd-Frank Act will encourage whistleblowing. This level is significantly higher than across emerging markets as a whole (69%).

% Mature Markets

% Emerging Markets

% Overall Europe

66 51 60

30 32 31

24 25 24

28 24 26

36 33 35

7 7 7


Businesses remain under pressure

Q. Following the difficult economic conditions of the last two years, which of the following do you expect to be the biggest pressures affecting your company in the next 12 months?

Base: All Romania respondents 2011 (104); 2009 (100); Mature Markets (1,335); Emerging Markets (1,030); Overall Europe (2,365)

52

31

29

26

23

9

65

51

12

25

7

2009 2011

Increased pressure to reduce costs

Redundancies / job losses

Increased pressure to comply with regulations

Increased pressure to boost profit margins

Increased pressure to boost revenues

None of these


Businesses remain under pressure

Q. Following the difficult economic conditions of the last two years, which of the following do you expect to be the biggest pressures affecting your company in the next 12 months?

% Applies% Board/

Management% Other

employees

52 52

26 33

32 27

29 25

19 25

13 7

52

31

29

26

23

9

Base: All Romania respondents 2011 (104); Board level / senior management or other management (31) Other employee/ Other (73)

Increased pressure to reduce costs

Redundancies / job losses

Increased pressure to comply with regulations

Increased pressure to boost profit margins

Increased pressure to boost revenues

None of these

32

2

12

6

3

17

8

2

37

41

29

27

45

64

Many companies still facing financial difficulties


Base: All Romania respondents 2011 (104); 2009 (100); Overall Europe (2,365)

Q. To what extent do you agree or disagree with the following statement about the impact of the current global economic situation? More companies will get into financial difficulties over the next 12 months

% Strongly agree

Mature Markets 27

Emerging Markets 27

% Strongly disagree

% Tend to disagree

% Tend to agree

% Strongly agree

% Don’t know

% Neither agree nor disagree

Europe 2011

Romania 2011

Romania 2009

2

1

3

1

2

11

4

5

17

16

4

40

38

37

27

40

52

Fewer anticipated redundancies than in 2009


Q. To what extent do you agree or disagree with the following statement about the impact of the current global economic situation? There will be an increase in the number of redundancies as companies cut costs


% Strongly agree

Mature Markets 25

Emerging Markets 30

% Strongly disagree

% Tend to disagree

% Tend to agree

% Strongly agree

% Don’t know


Europe 2011

Romania 2011

Romania 2009

Bribery seen as widespread in many markets

Q. For each of the following, can you let us know whether you think it applies, or does not apply to your country/industry or whether you don’t know?


31

56

88

34

28

7

36

16

5

% Applies Don't know % Does not apply

Base: All Romania respondents (104); Overall Europe (2,365)

Bribery/corrupt practices happen widely in business in this country

Has been an increase in corrupt practices due to economic downturn

In our sector, it is common practice to use bribery to win contracts

% Applies Europe

62

40

28


Pressure on management to improve financial performance remains high

Q. To what extend do you agree or disagree that managers will be under increased pressure to deliver good financial performance over next 12 months?


3

4

1

3

1

4

5

3

2

14

11

14

39

37

30

36

45

49

% Strongly agree

Mature Markets 35

Emerging Markets 38

% Strongly disagree

% Tend to disagree

% Tend to agree

% Strongly agree

% Don’t know


Europe 2011

Romania 2011

Romania 2009


Management perceived to be likely to cut corners

Q. To what extent do you agree or disagree that company management is likely to cut corners to meet targets when economic times are tough?

Board level/ senior management / other management

16

8

19

11

35

14

19

40

10

19 8

Base: Board level/senior management / other management (Romania 31; Europe 709); Other non-management employees (Romania 73; Europe 1656)

Other non-management employees

% Strongly disagree

% Tend to disagree

% Tend to agree

% Strongly agree

% Don’t know


% Agree Europe

50

62

Unethical behavior is widespread in some markets


Base: Board level / senior management or other management (31) Other employee/ Other (73); Overall Europe (2,365)

23

23

19

3

55

3

32

34

18

15

27

22

Other Employee / OtherBoard level / senior management or other management

Q. Which of the following do you feel can be justified if they help a business achieve growth?

Offering personal gifts or services to win or retain business

Offering cash payments to win or retain business

Offering entertainment to win or retain business

Deliberately misstating a company's financial performance

None of the above

Don't know

19

17

17

5

51

11

% Overall Europe

Significant fraud experienced in the last 2 years

Q. Has your organization experienced a significant fraud in the last 2 years?


% Yes

Russia 37

Hungary 27

Croatia 26

Baltics 21

Portugal 21

Greece 20

Poland 19

Czech Rep 17

Turkey 17

Ireland 16

Romania 16

TOTAL 16

Ukraine 16

Germany 13

Norway 12

Spain 12

Switzerland 12

France 11

Italy 11

Austria 10

Netherlands 10

Sweden 10

UK 10

Slovakia 5

16

40

43

% Yes

% No

% Don't know/ Refused

Base: All Romania respondents (104)

% Yes

Mature Markets 13

Emerging Markets 20

2011 European Fraud Survey

Room for improvement in corporate anti-fraud efforts

Q. Would you say your company’s efforts to combat fraud have been increasing or decreasing over the last few years?

% Increasing % Decreasing

Turkey 42 10

Hungary 38 3

Ireland 37 6

Slovakia 37 3

France 34 6

Poland 34 8

Romania 34 9

Switzerland 33 7

Austria 32 2

Portugal 32 10

Greece 31 7

Norway 29 6

UK 29 5

TOTAL 29 7

Italy 26 6

Germany 25 7

Croatia 24 8

Ukraine 23 5

Netherlands 22 4

Spain 22 11

Baltics 21 5

Czech Republic

20 6

Russia 19 14

Sweden 17 4


2093834

% Decreasing% Increasing % Don’t know% No difference

% Increasing

Mature Markets 28

Emerging Markets 29

% Mature Markets% Emerging

Markets% Overall

Europe 2011

50 63 55

35 44 39

29 43 35

39 38 39

25 31 28

22 25 23

17 18 18

17 17 17

7 8 8

27 12 20

69

53

43

40

27

23

9

23

7

15

80

59

67

51

45

38

27

30

1

3

Anti-fraud efforts falling behind

Q. Does your company have any of the following anti-fraud measures in place?


Base: All Romania respondents (104); Mature Markets (1,335); Emerging Markets (1,030); Overall Europe (2,365)

% 2011 % 2009

Internal auditing

External auditing

Stronger controls/scrutiny of expenditure

Code of conduct

HR/legal counsel

Legal due diligence

Person with a position of confidentiality

Anti-fraud training

No measures in place

Don’t Know

Embedding anti-bribery / anti-corruption culture in business


People have been penalized for breaching our anti-bribery/anti-corruption policies

There are clear penalties for breaking our anti-bribery/anti-corruption policies

There is training on our anti-bribery/anti-corruption policies

The guidance on anti-corruption/anti-bribery is available in local languages

Senior management has strongly communicated its commitment to our anti-bribery/anti-corruption policies

We have an anti-bribery/anti-corruption policy and code of conduct

23

47

32

35

51

57

39

18

28

27

21

17

38

35

40

38

28

26

% Applies Don't know % Does not apply

Q. Which of the following, please let us know whether it applies, or does not apply, to your organization, or whether you don’t know?


56

49

44

38

45

27

% Overall Europe

% Applies % Board/ Management

% Other employees

57 61 55

51 52 51

47 45 48

35 29 37

32 35 30

23 29 21


Embedding anti-bribery / anti-corruption culture in business

57

51

47

35

32

23

Q. Which of the following, please let us know whether it applies, or does not apply, to your organization, or whether you don’t know?

Base: All Romania respondents 2011 (104); Board level/senior management or other management (31); Other non-management employees (73)

We have an anti-bribery/anti- corruption policy and code of conduct

Senior management has strongly communicated its commitment to our anti- bribery/anti-corruption policies

There are clear penalties for breaking our anti- bribery/anti-corruption policies

The guidance on anti- bribery/anti-corruption is available in local languages

There is training on our anti- bribery/anti-corruption policies

People have been penalized for breaching our anti- bribery/anti-corruption policies

10

30

13

31

32

13

1

4

18

5

4

34

4

4

7

5

10

13

13

11

17

18

17

21

20

25

25

22

23

13

52

27

19

18

13

7

Impact of anti-bribery / anti-corruption measures on corporate behavior


Base: All Romania respondents 2011 (104); Overall Europe (2,365)

Q. To what extent do you agree or disagree with the following statements?

There is a commercial advantage in being a company with a strong reputation for ethical behavior

Our anti-bribery/anti-corruption code of conduct is adequate in preventing and detecting bribery/corrupt practice

I have seen people with questionable ethical standards being promoted in this company

Employees of my company comply with the anti-bribery/anti-corruption policy / code of conduct

Our anti-bribery/anti-corruption policy has little impact on how people actually behave

I don’t trust our management to behave ethically

% Agree Europe

% Strongly disagree

% Tend to disagree

% Tend to agree

% Strongly agree

% Don’t know


66

45

33

50

32

26


% Yes

Board director / senior management /other management

45

Other employee 40

Q. Have you personally received anti-bribery/anti-corruption training?

Extent of anti-bribery/anti-corruption training

% Yes

Mature Markets 23

Emerging Markets

18

% Yes

Romania 41

Ireland 38

Norway 32

Switzerland 32

Greece 29

UK 26

Italy 22

Slovakia 22

Sweden 21

TOTAL 21

Turkey 20

Poland 18

Russia 18

France 17

Hungary 17

Portugal 17

Spain 17

Netherlands 16

Austria 15

Germany 15

Ukraine 14

Czech Rep 13

Baltics 11

Croatia 5


41

59% Yes

% No

Perception of companies involved in major bribery cases

2011 European Fraud survey 2011 European Fraud surveyPage 20

Q. And if they were a supplier or agent, which, if any of the following would apply?

Q. Thinking about your perceptions of a company that had been involved in a major bribery or corruption case, which, if any of the following would apply?

It would make no difference to my willingness to work for them

I would be willing to work for/hire them but would need more money/expect a discount

I would be willing to work for/hire them but would need reassurance about their actions to address the problem

I would be unwilling to work for/hire them

7

1

28

64

13

8

38

43

% Willingness to work with

% Willingness to hire


% Europe

45

53

35

33

7

5

15

10

The expected impact of the Dodd-Frank Act on reporting of suspected fraud, bribery and corruption


Q. Do you think such an approach will encourage employees of US publicly listed companies to report cases of suspected fraud, bribery or corruption?

% Yes

Overall Europe 66

Mature Markets 63

Emerging Markets 69

Board level / senior management / other management

84

Other employee 77

79

6

15 % Yes

% No

% Don't know


As you may know, the United States of America introduced the Dodd-Frank Act in 2010. In summary, this makes whistleblowers – employees (of any nationality) who reveal new information about suspected illegal corporate behavior of a US publicly listed company to the US securities regulator – eligible, in certain circumstances, to receive a substantial reward, up to 30% of any fines of more than $1million.

Perception of regulators across different countries


Q. Thinking about regulators and law enforcement authorities in your country, which of the following statements best describes their approach to cases of bribery/corruption?

% Unwilling to

prosecute% Feel is

ineffective Ireland 51 24

Ukraine 51 16

Croatia 44 52

Czech Rep 41 41

Russia 37 38

Greece 36 43

Slovakia 36 55

Hungary 34 53

Portugal 34 38

Romania 34 51

Baltics 31 42

Turkey 30 43

Netherlands 27 37

TOTAL 26 42

France 24 39

Poland 23 56

Spain 18 44

Austria 14 43

Italy 13 67

UK 12 30

Germany 10 41

Norway 10 35

Switzerland 8 48

Sweden 7 31

They appear willing to prosecute cases of bribery/corruption and seem effective in securing convictions

They appear willing to prosecute cases of bribery/corruption but do not seem effective in securing convictions

They do not appear willing to prosecute cases of bribery/corruption

Don't know

9

51

34

7


% Mentioning

Perceived challenges to the effectiveness of regulators


% Mature Markets

% Emerging Markets

% Overall Europe

74 41 64 53

41 28 20 24

26 29 32 30

25 24 13 18

17 35 21 28

5 11 12 12

0 5 4 5

Base: All Romania respondents answering codes 2 or 3 at Q33 (88); Mature Markets (782); Emerging Markets (830); Overall Europe (1612)

Q. Why do you say regulators and law enforcement authorities are not willing to prosecute cases of bribery/corruption or are not effective in securing convictions?

% Mentioning

Bribery/corruption is too widespread to be tackled

They don't want to damage businesses or force them to close in the current economic conditions

Lack the legal powers needed

They are afraid of damaging relationships with other countries

Don't have sufficient resources

Other

74

41

26

25

17

5

0

Demand for increased supervision by regulators

Q. To what extent do you agree or disagree with each of the following statements? There should be more supervision by regulators and government in the future, to try to reduce the risk of fraud, bribery and corruption


Base: All Romania respondents (104); 2009 (100); Overall Europe (2,365)

% Strongly agree

Mature Markets 37

Emerging Markets 57

6

3

1

2

2

3

3

1

3

12

6

12

32

28

38

45

61

43

% Strongly disagree

% Tend to disagree

% Tend to agree

% Strongly agree

% Don’t know


Europe 2011

Romania 2011

Romania 2009

Employees want more aggressive regulatory oversight

Q. To what extent do you agree or disagree with each of the following statements? I would feel more secure in my job knowing that government / regulators were scrutinizing our company more closely


Base: All Romania respondents (104); 2009 (100); Overall Europe (2,365)

% Strongly agree

Mature Markets 25

Emerging Markets 39

7

7

5

7

8

15

8

8

10

23

28

21

24

27

21

31

23

28

% Strongly disagree

% Tend to disagree

% Tend to agree

% Strongly agree

% Don’t know


Europe 2011

Romania 2011

Romania 2009

Burcin AtakanSenior Manager Fraud Investigation & Dispute Services

Tel: +40 21 402 4000Fax: +40 21 310 7193Email: [email protected]

Ernst & Young

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2011 European fraud survey Presentation of Romania findings June 2011.

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Transcript of 2011 European fraud survey Presentation of Romania findings June 2011.