Fraud & Corruption Risk “Up”
The past couple of years the Middle East has witnessed a noticeable slowdown in the economy, which is evident in the increased availability of properties, drop in properties’ lease and sale prices and the increased number of layoffs of employees due to organizations efforts to control their costs.
The economy slowdown can be attributed to a number of reasons predominantly the geopolitical unrest in the region with wars in Syria, Iraq and Yemen. The rift in the GCC with Qatar also is adding to the mix with further uncertainty about the stability of the region.
If we revert to the key reasons that attract expats to the GCC, those would come down to tax free income and handsome pay checks. These now are at risk as the above circumstances have added to the state of uncertainty and instability expats suffer from in this region, creating an environment of living a day at a time with limited prospectus of the future and paves the road for a more opportunistic drive to maximize the gains during the short tenure they are in the region for.
Key factors that are amplifying fraud and corruption risk in GCC
- Geopolitical instability.
- Career instability and uncertainty leading to employee dissatisfaction.
- Financial instability and increased liquidity risk at the organizations impairing their abilities to pay their employees dues.
- High cost of living which is expected to go higher with the introduction of VAT in 2018.
- Lack of accountability for Executives.
- Lack of awareness about the importance of effective governance.
- Ineffective risk management practices.
- Ineffective fraud and corruption prevention programs.
- Ineffective regulatory bodies with limited deterrents for fraudulent activities.
Way forward to counter the rising fraud and corruption risk
Fraud and corruption prevention requires a comprehensive system that integrates risk management, regulatory compliance and human resource management with an amplified focus on increasing awareness about fraud and corruption risks.
Proper governance alone is not sufficient to counter fraud and corruption risk, it has to be combined with clear accountability for all employees, management and directors.
Having a fraud reporting hotline is good practice which is useless if there is no clear and transparent action plan to deal with cases raised by the hotline or if not combined with adequate awareness and accessibility for individuals to utilize it.
In short, the best way to counter fraud and corruption risk is to deviate from accepting compliance and governance activities as a “nice to have” – “tick the box” activities and integrate them as vital components in the organization with a clear objective to manage organizational risks as a whole and by default fraud and corruption risks.