Corruption remains integral part of Hungarian business practices

January 26, 2016


Corruption is an integral part of Hungarian business practices, with only one in five companies taking adequate steps to prevent corruption and fraud, according to a joint study prepared by Ernst & Young and the Hungarian Trade and Industrial Economic and Entrepreneurial Institute released on Tuesday.

When it comes to implementing measures to prevent corporate abuse or corruption, Hungarian companies lag far behind international standards.  According to Ferenc Biró, the head of Ernst & Young’s risk management division, company heads are not willing to spend even small amounts of money in the interest of preventing fraud.

The study was prepared on the basis of interviews conducted with the heads of 300 companies employing at least 50 individuals each in agriculture, industry, construction, trade, tourism, logistics, freight forwarding and other service industries.

There were no significant changes in 2015 in comparison to previous years.  The largest threat to companies remains the risk of abuse involving a company’s assets.   Less than 20 percent identified corruption as a threat.

According to the study, only 13 percent of companies active in Hungary devote attention to defining and monitoring activities and positions where the risk of fraud is highest.  Little attention is paid to conflicts of interest, such as employees owning shares in entities with which the company does business.

With regard to information security, company heads are more concerned about employees leaking information than outside parties hacking their systems.

Ethics?  What ethics?

The number of Hungarian companies having no ethical codex increased from 66 percent to 70 percent.  By contrast, over 75 percent of companies surveyed internationally have one.

Few Hungarian companies maintain an “ethical hotline” or  provide anti-corruption instruction, and only one in five has an individual or office to which employees wishing to report fraud can turn.

According to the study, 70 percent of the directors of small- and medium-sized companies consider fraud management or prevention to be unnecessary given the relatively small size of their workforce, even though statistically smaller companies are more vulnerable to embezzlement, theft and other abuses than larger ones.