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Perceived Corruption in Hungary Continues to Grow

Corruption and bribery in Hungary appears to be worsening, with more executives reporting the presence of such practices, although most claim to have no first-hand experience, EY’s EMEIA Fraud Survey 2017 reveals. The Budapest Business Journal discussed the findings with Ferenc Biró, EY Hungary partner of Business Integrity and Compliance Management, who believes immediate action must be taken to prevent the situation worsening.

Ferenc Biró, EY Hungary partner of Business Integrity and Compliance Management.

An outstanding 78% of Hungarian leaders say they believe bribery and/or corruption happens widely in the country’s business life, EY found based on its research conducted between November 2016 and January 2017, interviewing 4,100 senior decision-makers in a sample of the largest companies in 41 markets and territories. The Hungarian figures are higher than the Eastern European average, where 64% of respondents view business life similarly. As far as emerging markets are concerned, the ratio is 61%, while in developed markets, only 36% experience such practices. 

“Based on the results of our last eight surveys, we can say that Hungarian executives do perceive a constant growth in corruption and bribery in their businesses, while individually claim not to have first-hand experience,” Biró comments on the findings for the BBJ. “The numbers do not paint a nice picture on how Hungarian business leaders see corruption in the Hungarian economy. Since 2012, an increasing number of business leaders say that they experience some form of corruption. In the last five years, their number has risen by more than 25% [from 58% to 78%],” the professional adds.

Another figure that further casts a shadow over Hungarian business life is that 69% of the respondents say that fear for their own personal safety is a factor that prevents them from reporting on an incident of fraud, corruption or bribery. This is followed by a respective 26% being loyal to colleagues and fearing future career progression at their company, while fearing future career possibilities at other companies is a concern for 14%. “The Implementation rate of mechanisms such as compliance programs, including whistleblowing hotlines, that would allow the gaining of first-hand information and support prevention and detection continues to be lower than expected,” Biró comments.

However, as far as the ethics of participants are concerned, there appears to be a silver lining to the clouds. Only 18% admitted they were willing to offer cash payments to win or retain business in order to help businesses survive. Hungarians claimed to be willing to book revenues earlier than they should be in order to meet financial targets only in 13% of cases. Just 4% of the respondents said they would be prepared to provide false information to management to improve their career or pay, while only 5% would be prepared to deliberately misstate a company’s financial performance to meet financial targets; 15% admitted they would be prepared to act unethically to improve their own career progression or remuneration package.

Immediate Action Needed 

In order to stop the business corruption and bribery from worsening, actions should be taken in the field, EY says, and there appears to be a demand for such. More than half (57%) of the Hungarian respondents told EY that they believe prosecuting individuals would help deter fraud, bribery and corruption, while only 16% believes regulatory activity has had a positive impact on the matter lately.

“We are of the view that unless immediate action is taken, the situation will continue to worsen,” Biró says, noting that each and every stakeholder is responsible for fighting bribery and corruption. Only 23% of the respondents said they had heard senior management communicate frequently regarding the importance of maintaining high ethical standards in the last two years.

Therefore, Biró stressed that the most important task would be that business leaders introduce appropriate compliance systems and mechanisms and establish a “zero-tolerance culture”, which at the same time supports employees coming forward with information and safeguards them from retaliation.

“Simultaneously, leaders need to emphasize the importance of fair and ethical business behavior, even in difficult times and when under pressure to deliver results. Employees alike need to recognize and act upon their own responsibility to stop unethical business practices. Regulators, on the other hand, should support ethical businesses through increasing meaningful regulatory effort and oversight. We believe these are key to sustainable growth,” Biró concludes.