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EY: Corruption in Emerging Markets

2019-01-04 17:14 Friday


Over the past five years, emerging markets have undergone major changes, with many transforming into global economic centers and contributing substantially to global economic growth. However, according to Simona Radu, Associate Partner, Forensic & Integrity Services at EY Romania, regulatory changes in emerging markets and the impact of pervasive corruption are likely to increase business risks and even effect overall economic trend.

Emerging market corruption

Companies must take certain risks into account. While emerging markets are very promising and offer abundant opportunity, the growing risks associated with fraud, bribery and corruption serve as a potential impediment to economic growth.

In an EY survey of fraud in emerging markets, including Romania, 42% of respondents identified fraud and corruption as the biggest risks to their business, compared with 29% respondents in developed markets.

More than 52% of respondents noted that corruption was prevalent in emerging markets, compared with a figure of 20% in developed markets.

Bribery and corruption in emerging markets is estimated as being twice as high as that in developed markets, in the period since the survey was published in 2012.

Although emerging markets have made strides in combating corruption, it is worrying that the gap has not narrowed in recent years.

16% of emerging market respondents indicated that is a usual method for soliciting contracts.

The survey found that companies, employees and senior managers generally believe that bribery is necessary to ensure the survival of their company. Bribery can take many forms, ranging from small cash payments to ensure smooth customs clearance for goods, to hundreds of thousands of dollars in bribes  for the contract to a major infrastructure project. The risk of criminal prosecution is no longer limited to bribing companies or employees, now extending to distributors, agents, partners, and other third parties.

The survey also shows that many managers still consider it acceptable to trade cash payments for a business advantage. 19% of respondents in emerging markets thought this was reasonable, compared with 6% in developed markets.

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