Canadian companies ignoring global investment risks

While the majority of Canadians execs are aware of the risks of global markets investments, little more than half (52%) do research and risk analyses prior to acquiring new businesses, says Ernst & Young in a new survey called 12th Global Fraud Survey – Growing Beyond: a place for integrity.

To make matters worse, the survey finds only 29% of Canadian organizations perform post-acquisition due diligence into corruption-related risks.

“Canadian companies are aware of the risks posed by fraud, bribery and corruption, but continue to expose themselves by not taking critical steps,” says Mike Savage, partner in Ernst & Young’s fraud investigation & dispute services practice.

He adds, “Moving into new markets can reap significant rewards if done right, but investors must first understand the local commercial practices of the region and the goals of the targeted company.”

Read: Investors should target emerging markets

Almost half (42%) of execs say company management is likely to cut corners when economic times are tough to meet targets. Globally, the percentage is higher.

Also, while almost all Canadian companies (95%) have anti-bribery and anti-corruption policies in place, only 43% of people who’ve breached policy have been penalized.

Read: Fraud slipping past Canadian regulators

“In volatile environments, growth and responsible business conduct can sometimes appear to be competing priorities,” says Savage. “But opportunities should be pursued by using internal controls to mitigate the risks.”

Doing so requires more than proper research and policy, however. Only 28% of execs think they have joint liability for the actions of the third party, but regulatory settlements show third-party monitoring—of distributors, agents and business consultants, for instance—is a strict compliance requirement.

Concerning fraud prevention, Canadians depend most on regular internal audits (90%), external audits (82%) and whistle-blowing hotlines (81%).

Read: Dormant companies ripe for fraud