“what is still missing is a robust tone-from-the-top leadership for integrity”

Interview with Ekaterina Lysova, Program Director, CIPE

Katya Lysova leads the Business Integrity and Anti-Corruption Programs in Europe and Eurasia at the Center for International Private Enterprise (CIPE). She works on a diverse portfolio that spans 10 countries and is coordinating private sector-led business integrity collective action initiatives across Europe and Eurasia. Lysova supports anti-corruption programs and projects globally through engaging with CIPE Anti-Corruption and Governance Center. Lysova has been a visiting lecturer for the Anti-Corruption Compliance Training Program conducted by the Ukrainian Corporate Governance Professional Association (CGPA) since 2020. Her specialty is in compliance approaches for SMEs, public policy on anti-corruption, business ethics compliance in value chains and in emerging markets, and she is passionate about collective action initiatives to strengthen private and public sector accountability.

Lysova has over 15 years of experience working on issues of media freedom, civil society development, and anti-corruption in Europe and Eurasia. Prior to joining CIPE, Lysova worked with investigative reporters on legal aspects around corruption investigations, consulted for the World Bank Integrity Compliance Unit and Preventive Services Unit, and led corporate transparency initiatives at TRACE. She holds a Master’s degree from Georgetown University School of Foreign Service and Ph.D. in law from the Far Eastern Federal University in Vladivostok, Russia.

World Politics: There is a lively debate among economists and economic policy-makers in the region about the path of development in the next era of globalization, including industrial policy and the role of business. To what extent has the corporate and organizational culture in the region adapted to the next era? How much compliance awareness is needed to catch up? Beside the tourism in the Western Balkan, which other industries can emerge in developing of organizational culture? 

Katya Lysova: The ongoing debate about the future of globalization and industrial development underscores the ever-increasing significance of local communities. It is within these communities that key decisions will be made, such as what support or services should be prioritized considering newly emerging challenges and opportunities. The local private sector – encompassing individual entrepreneurs, small and medium-sized companies – will continually serve as the foundation of these communities. By providing essential services, products and spearheading innovation and entrepreneurship, they foster community livelihood. When these local businesses earn the trust of customers, business partners, and local public officials, they fortify the community, making it more cohesive and resilient to changing socio-economic and political conditions.     

To earn and sustain trust, local businesses would have to uphold transparent and accountable business practices.  This includes prioritizing integrity in every operational decision, from selecting business partners to participating in local tenders to tax compliance and transparency in customer interactions. By committing to integrity, businesses cement themselves as vital players in local decision-making processes. This involves developing and voting on specific policies and regulations, as well as determining economic priorities for further local and regional development. By emphasizing compliance and integrity, businesses not only realize their potential, but also enhance the well-being of their communities. The increasing number of initiatives promoting honest, responsible, and sustainable businesses, including business ethics initiatives throughout the region in recent years, is testament to the growing awareness of social responsibility among businesses, emphasizing a role that transcends mere profit generation.  However, what is still missing is a robust tone-from-the-top leadership for integrity, starting with national political and business leaders and extending to regional and municipal authorities. Effective regulatory and legislative incentives promoting integrity and compliance could  foster a culture of integrity among businesses and a broader population,  leading societies  towards sustainability and cohesion.      

The surge in regional and global tourism throughout the Western Balkan region has been a driving force behind new business practices and compliance standards adopted by local companies.  This trend seems likely to persist, especially as countries such Albania and North Macedonia, continue to strengthen their position in the global tourism stage. As countries worldwide, including those in the Western Balkans, grapple with changing climate patterns and the call for renewable energy, new international partnerships and technological transfers will likely take place. This will require that local businesses meet specific compliance standards and undergo thorough due diligence checks.              

World Politics: The similarities between the countries of the former Eastern bloc are often reflected in economic policy thinking. Is this noticeable in terms of compliance awareness? Besides similarities, what differences do you perceive between countries or regions (Baltic States, V4, Western Balkans)? In terms of trade, what opportunities and challenges do Western Balkan nations face in the context of their regional neighbors and the broader European market?

Katya Lysova: More than three decades after the Soviet Union dissolution, private sector companies and entrepreneurs in the region are still grappling with having a conducive environment for transparent, ethical, and inclusive business environment. The region faces persistent challenges, including public and private sector corruption, entrenched oligarchic and kleptocratic systems, a pronounced distrust between public authorities and businesses, wide-spread apathy in engaging in social and economic affairs, and a lack of a long-term vision for economic prosperity. Global disruptions, such as the Covid 19 pandemic in 2020-2022 and Russia’s invasion of Ukraine in February 2022, have intensified the difficulties for small and medium-size enterprises in Europe’s emerging markets.

In light of these challenges, companies are pivoting towards strengthening their internal integrity policies and actions. Forming alliances with like-minded partners and peers offers a constructive and future-oriented solution against further setbacks. The evolution of technology is reducing traditional avenues for fraudulent and corrupt practices, while simultaneously amplifying opportunities for businesses to highlight their ethical stances and connect with like-minded partners. In this context, the European Union’s nearshoring strategies offer valuable opportunities for the private sector in countries, such as Poland, Czechia, Hungary, and Romania to continue building their compliance and due diligence capacity. Consequently, the integration of compliance and business integrity measures into these companies’ supply chains will prompt enhanced compliance among business partners beyond the Visegrad Four countries and throughout the EU market.                    

World Politics: What are the means to overcome the gaps that characterize the region in terms of compliance awareness? How do these tools differ from those used in Western countries?  Which actor is considered the most important in terms of overcoming this backlog: the state, banks, financial institutions or the civil sector (chambers, universities, associations)?   If given the opportunity, which actor would you strengthen?

Katya Lysova: Often, companies in the region perceive compliance and business integrity as external mandates thrust upon them. This perception primarily arises when companies lack information about the roots, purpose, and multifaceted nature of compliance. As a result, companies find themselves ticking the boxes in due diligence questionnaires which they don’t truly understand, copying and pasting compliance programs and policies of other more established companies, and assigning compliance responsibilities to part-time employees who are disconnected from the core organization.  Such practices are harmful for a company’s internal culture and strain relationships between employees and management, breeding cynicism, duplicity, and fundamentally undermining the concept of integrity.

It is imperative that companies have access to comprehensive information on compliance and develop a solid understanding of its benefits. At CIPE, we call this the “business case for compliance.” Among some of the most common benefits of compliance are stronger employee trust and loyalty to the organization, greater ability to attract more ambitious and skilled professionals, stronger business partnerships with reputable domestic and international companies, reduced risk of fraud and corruption violations, and safeguarding a company’s reputation from the implications of corruption scandals, among others.

In CIPE’s experience, business associations and chambers of commers are most suitable vehicles to promote a culture of integrity among their members. Nevertheless, they first require support and training to effectively disseminate integrity knowledge to their member-companies. CIPE offers comprehensive programs throughout the region for this purpose. Banks and other financial institutions also play a pivotal role in promoting business integrity and compliance. They can incentivize this by offering preferential loan interest rates to businesses demonstrating robust anti-corruption compliance measures. Similarly, public procurement procedures can prioritize companies with demonstrable compliance initiatives and anti-corruption pledges over those lacking them. By embedding ethics and integrity programs in academic curriculums, societies can instill these values early on, nurturing more conscientious future entrepreneurs and professionals. From this perspective, every societal member has a part in championing integrity, ensuring it is an unwavering factor in every decision made.

“This interview was prepared with support from the Center for International Private Enterprise (CIPE), whose mission is to strengthen democracy around the globe through private enterprise and market-oriented reform. The report was researched, prepared, and published exclusively by the IVE. These views do not necessarily reflect those of CIPE.”           

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