IN BRIEF:
• Ethical risks remain a significant concern for businesses in Southeast Asia.
• Major issues include a weak integrity culture, third-party risks, and inadequate whistleblower protections.
• Organizations must focus on leadership accountability, governance of third-party relationships, and the integration of environmental, social, and governance (ESG) values into their core operations.
Southeast Asian organizations are facing substantial ethical risks that threaten their business stability, despite notable advancements in compliance measures. As the region’s economies continue to expand, the need for a robust integrity framework has never been more critical. Rapid economic growth often brings about increased competition, which can lead to ethical compromises if not managed effectively.
Companies must navigate a complex landscape characterized by diverse regulatory environments, cultural differences, and varying levels of enforcement. This makes it imperative for organizations to both comply with existing laws and foster a culture of integrity that permeates every level of their operations.
The EY Global Integrity Report 2024 highlights these pressing concerns, drawing insights from over 5,500 board members, managers, and employees worldwide. The report serves as a vital resource for organizations seeking to enhance their ethical frameworks. As Southeast Asia continues to develop, the region must address these integrity challenges head-on to ensure sustainable growth and maintain stakeholder trust.
THE NEED FOR A STRONG INTEGRITY CULTURE
The survey indicates that while 71% of Southeast Asian respondents report improved integrity standards — outpacing the global average of 49% — there remains a troubling tolerance for unethical behavior among senior management. A staggering 44% of respondents believe that unethical conduct is overlooked by leadership, compared to 31% globally. This discrepancy reveals a “say-do” gap, where the ethical commitments of leadership do not align with their actions.
Organizations that cultivate a strong integrity culture will build trust with stakeholders and attract greater investment. Conversely, those with governance issues face heightened scrutiny and reputational risk. To foster a robust integrity culture, organizations must prioritize leadership accountability and ethical decision-making at all levels.
ENHANCING WHISTLEBLOWER PROTECTIONS
The report shows that Southeast Asia lags in providing adequate protections for whistleblowers. Nearly two-thirds of respondents feel pressured not to report misconduct, with 44% doubting that their concerns would be addressed. This lack of confidence extends to senior management, with half reporting similar pressures.
To address these gaps, organizations must establish confidential and transparent reporting channels that protect employees from retaliation. A strong whistleblower program can facilitate quicker issue detection and remediation, ultimately reducing regulatory penalties and reputational damage.
In the Philippines, there has been an increase in the interest of some companies to strengthen their whistleblowing program, including plans to fully outsource the operations of their reporting channels to third-party professional firms.
ADDRESSING THIRD-PARTY RISK
Third-party risk poses a significant challenge in Southeast Asia, with 84% of integrity incidents in the region linked to external relationships. Alarmingly, 20% of respondents would ignore unethical behavior from third parties if prompted by their superiors, and 21% would do so if it benefited their career or financial situation. This highlights the urgent need for organizations to strengthen their governance frameworks regarding third-party relationships.
Recent multimillion-dollar fines for fraud and corruption involving third parties underscore the importance of implementing thorough due diligence processes to ensure that external partners adhere to the same ethical standards as internal employees.
ETHICAL RISKS IN AI ADOPTION
As artificial intelligence (AI) adoption grows in Southeast Asia — 37% of organizations are already utilizing AI tools — businesses must establish governance frameworks to manage risks such as data privacy and algorithmic bias. However, the region’s underdeveloped structures expose businesses to potential ethical violations. Clear AI governance is essential to navigate these challenges responsibly.
THE ROLE OF ESG IN BUSINESS STRATEGY
While ESG considerations are gaining traction, many businesses in Southeast Asia remain primarily compliance driven. Almost 64% of respondents indicate that their ESG policies are motivated by regulatory requirements rather than genuine internal reform. To achieve long-term sustainability, organizations must embed ESG values into their core strategies, linking these initiatives to profitability and stakeholder trust.
C-LEVEL CONSIDERATIONS
To enhance their integrity frameworks and mitigate ethical risks, organizations in Southeast Asia should prioritize leadership accountability and strengthen third-party governance. Closing the “say-do” gap is essential; leaders must model ethical behavior and hold themselves accountable for any lapses. By investing in programs that foster a strong culture of integrity, organizations can create an environment where ethical decision-making is encouraged at all levels. There should also be consistent disciplinary action against employees who are found to have integrity issues. This consistency is crucial to demonstrate the seriousness of leaders in fostering a strong integrity culture. Additionally, it is crucial to strengthen oversight of third-party relationships through thorough due diligence processes, ensuring that external partners uphold the same ethical standards as internal employees.
Moreover, organizations must implement trusted whistleblower systems that allow employees to report misconduct confidentially and without fear of retaliation. Establishing fair investigation protocols will further enhance trust within the organization. Alongside these measures, developing robust governance frameworks to manage the ethical risks associated with AI is vital. This includes addressing data privacy and algorithmic bias to navigate the complexities of AI responsibly.
Finally, organizations should move beyond compliance-driven ESG initiatives and integrate sustainability values into their core operations. By aligning decision-making processes with long-term growth objectives, businesses can enhance their integrity frameworks and position themselves as ethical leaders in the marketplace. Strong governance and ethical behavior will ultimately safeguard organizations from legal and reputational risks while fostering sustainable growth in an increasingly competitive environment.
BUILDING RESILIENCE THROUGH INTEGRITY
As Southeast Asian organizations confront these integrity challenges, the path forward will require a concerted effort to embed ethical practices into their core operations. By prioritizing leadership accountability, enhancing third-party governance, and fostering a culture of transparency, businesses can build resilience against ethical risks. The integration of ESG values into everyday decision-making will enhance compliance as well as drive long-term sustainability and stakeholder trust.
Organizations that proactively address these challenges will be better positioned to thrive. By committing to ethical practices and robust governance frameworks, Southeast Asian companies can emerge as leaders in integrity, setting a benchmark for others in the region and beyond.
This commitment to ethical behavior can help protect against legal and reputational risks as well as contribute to a more sustainable and equitable business environment for all stakeholders.
This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinion expressed above are those of the author and do not necessarily represent the views of SGV & Co.
Roderick M. Vega is the forensic and integrity services leader of SGV & Co.
