Corruption and other criminal activity have been shown to be systematic even in countries with rigorous legal systems. Russia, China and the African region are seen as the most corrupt in the world, with a significant number of respondents to AlixPartners’ global corruption survey highlighting that it is sometimes impossible to operate in these regions without encountering some form of corruption. The survey too highlights that by keeping up-to-date on compliance – with 81% adopting anticorruption programmes – a significant amount of corrupt behaviour can be inhibited.
With the high stakes corruption charges laid against high profile banks in various developed regions – a pious belief that corruption is a problem for developing countries has been shown to be a myth. In recent years, the Libor crisis, the HBSC Swiss fiscal fraud and various other large scale systematic crimes have cost the industry trust and billions of dollars.
In a recent global survey from AlixPartners, titled ‘Combating Corporate Corruption’, the consulting firm surveyed general counsel, compliance officers, and other related company executives representing more than 20 key sectors across North America, Europe, and Asia about their companies’ anticorruption efforts, compliance policies and at identifying and mitigating corruption risk.
Global corporate corruption risk
The area which is perceived as the area with the least amount of risk overall is Canada, with 29% indicating that there was next to no risk of corruption, although 8% say that in their sector there was a significant risk of corruption. The UK comes in second, at 28% indicating no risk – however the significant-risk responses are at 12%. Japan had the lowest level of significant risk, at 4%. The country with the most significant risk to do business in is Russia (75%), which is followed by the African region (59%) and China (53%). The Eastern European region and Mexico too come in as harbouring significant risks for corruption, at 44% and 43% respectively.
The companies surveyed are for the most part aware of corruption and the effects it may have on their wider business, in terms of regulatory compliance and consumer sentiment. The survey finds that 81% of respondents have in place various anticorruption programmes or documented anti-bribery and anticorruption policies. While those policies are passed to the majority of employees, not every Business Partner is informed nor Board of Directors, with 12% and 2% respectively not informed.
With regard to regional laws that are intended to curb corruption, 77% of respondents say such laws in Russia are ineffective; 76% say that the laws in the African region are generally ineffective; and 69% say the same of China.
The survey highlights that in some regions of the world, for some business types, it is impossible to do business without meeting with corruption. The countries cited by the most respondents are Russia at 62%; the African region at 53%; and China at 46%. Of the companies surveyed, 66% say they would still do business in a region on the basis of a corruption risk.
Many of the companies surveyed are signed up to programmes that address corruption issues within various regions according to various codes, with 73% saying their programme specifically addresses the US Foreign Corrupt Practices ActÍ¾ 55%, the UK Bribery ActÍ¾ and 44%, the US Office of Foreign Assets Control. Yet while many adopted a compliance programme (27%) within the last five year, 22% respond that they have not reviewed it in the past 12 months – while 52% respond that they have not had an independent third party audit their programme in the past 12 months.
The survey asked respondents to indicate the most successful strategies in their efforts to combat corruption. With 44% of respondents stating that proper anticorruption training for employees is the top priority, followed by 42% stating compliance policies that specifically address corruption, and 39% internal audits (usually done on an annual basis). Expanding the scope of their audits for foreign subsidiaries came in at 21% while 11% mentioned the increased use of incentives.
According to the survey the largest barriers to effective anticorruption results come from “inadequate staffing resources” (15%) and compliance “considered a lesser priority than the achievement of operating results” (12%).
The survey too highlights that one important channel for corruption efforts comes from having procedures in place to handle whistle-blowers; with 93% saying that they are available and 68% saying that they have a dedicated whistle-blower hotline.
Commenting on the survey results, Harvey Kelly, Managing Director and Global Leader of AlixPartners’ Financial Advisory Services practice, says: “As with many business issues, corruption is a dynamic phenomenon – one that requires a watchful eye, a strong preventative strategy, and a rapid response. […] Companies that engage senior leadership and their Boards; that regularly review their anticorruption programmes with fresh eyes; that provide on-going training; and that support and promote whistle-blower programmes have the greatest potential for mitigating the significant financial, operational, and reputational risks that corruption poses.”