Combating Corporate Corruption
The 2015 Anticorruption Survey

Anticorruption enforcement remained active in 2014, with a sharp rise in enforcement actions taken by both the US Department of Justice and the US Securities and Exchange Commission against corporate defendants. It included two of the largest settlements ever recorded under the Foreign Corrupt Practices Act (FCPA). Together the two agencies imposed fines totaling $1.56 billion in 2014—more than twice the amount collected in 2013.

Against that backdrop, we conducted our third annual Global Anticorruption Survey, which found 85% of respondents saying they believe their companies’ industries are exposed to at least some level of corruption risk. Of those, nearly one in four said they faced significant risk.

Although regulatory bodies around the world are stepping up their anticorruption efforts, corruption is still taking a considerable toll on corporate and economic growth. Among our survey participants, 22% said they thought their companies had lost business or customers because a competitor had made an illicit payment to a government official. About 26% said corruption had jeopardized their mergers-and-acquisitions (M&A) efforts; of those, 14% said they had aborted an acquisition and 12% reported delaying an acquisition due to concerns about corruption. As much as 28% said they had ceased doing business with a partner because of worries about corruption. And 34% said they had avoided doing business in regions with high risk of corruption.
 

Identifying High-Risk Geographies

FIGURE 1: Perceived high-risk geographiesNo country or region is immune to corruption, but our survey findings suggest that some places are perceived as particularly vulnerable to it. When asked to identify territories that pose significant corruption risk, 75% of our respondents cited Russia and 59% cited Africa—ahead of China (53%), Central and South America (52%), and the Middle East (48%) (figure 1). Of respondents who said their companies had avoided doing business in places with high corruption risk, 27% cited Russia and 23% cited Africa as geographies they avoided.

Cross-border differences present especially daunting difficulties for companies seeking to establish robust compliance programs. For example, 32% of our survey respondents cited “entering or doing business in high-risk regions” as “very challenging” for their compliance programs; 26% identified “variations in local laws.”

Strengthening Compliance Programs

FIGURE 2: Distribution of anticorruption program and policydocumentationBased on our survey, companies appear to understand the importance of combating corruption. In fact, 81% of respondents said their companies have in place various dedicated anticorruption programs or documented antibribery and anticorruption policies. All representatives of companies in our study that have such programs or policies confirmed that their companies distribute program and policy documentation to employees. But 12% said such information is not distributed to the organization’s business partners, and 2% said it’s not distributed to board members (figure 2).

Furthermore, when asked about anticorruption laws in the countries where their organizations operate, 77% said such laws are ineffective in Russia; 76% made the same claim regarding Africa; and 69% did so regarding China. Those perceptions contrasted with perceptions regarding anticorruption laws in western Europe, the United Kingdom, and the United States (16%, 11%, and 10%, respectively).

FIGURE 3: Compliance programs tailored to regulatory
requirements

As much as 64% of our respondents said they believe there are places in the world where it’s impossible to do business without encountering corruption. When asked to identify such places, 62% cited Russia; 53%, Africa; and 46%, China. Still, a number of companies opted to do business in high-risk regions; specifically, 66% said they have not avoided doing business in a region because of the risk of corruption. Although battling corruption remains a priority, our findings suggest that many companies see an uneven playing field.

FIGURE 4: Key success factors for anticorruption programs

Among survey participants who are with organizations that have dedicated compliance programs, such programs are tailored to a variety of legal requirements (figure 3). For example, 73% said the program specifically addresses the US Foreign Corrupt Practices Act; 55%, the UK Bribery Act; and 44%, the US Office of Foreign Assets Control. What’s more, increased enforcement of anticorruption laws such as the FCPA has had an impact on the adoption of compliance programs. Specifically, 27% of respondents said their companies adopted dedicated anticorruption compliance programs during the past five years. However, 22% said they had not reviewed their compliance programs in the past 12 months. A further 52% acknowledged that their companies had not received a third-party risk assessment of their programs during the past 12 months.

We asked respondents to take stock of their most-successful anticorruption programs and to cite what they see as the top factors in reducing corruption risk in their organizations. The most-important practices they identified were proper anticorruption training for employees (44%), compliance policies that specifically address corruption (42%), and internal audits (usually done on an annual basis) (39%) (figure 4). Only 21% cited expanding the scope of their audits for foreign subsidiaries, and just 11% mentioned the increased use of incentives. However, even though the steps needed for strengthening compliance programs and policies may be clear, implementing them can prove challenging for some companies. In fact, 15% of our survey respondents cited “inadequate staffing resources” as presenting an obstacle in their efforts to mitigate corruption risk. And 12% pointed to the notion that compliance may be considered a lesser priority than the achievement of operating results.

Those numbers raise red flags, given that the nature of corruption, regulatory enforcement, and perceptions of what constitutes corrupt behaviors are dynamic. The compliance efforts of organizations that don’t regularly review their anticorruption programs and policies or that don’t have them reviewed by third parties may become dated and potentially ineffective. Indeed, 35% of survey participants said their companies have not modified their anticorruption policies to reflect the UK Bribery Act’s ban on facilitation payments.

For our survey respondents, whistle-blower programs remain important tools for identifying and rooting out corruption in the organization. But even though 93% of them said their companies have processes in place for handling whistle-blower reports, only 68% have established whistle-blower hotlines. Of those, just 55% could confirm that the hotline was available to external parties, such as suppliers and customers. Indeed, investing in whistle-blower programs may be effective in reducing risk: Of respondents at companies that have hotlines, 20% said they had received through the hotline during the previous year some tips related to corruption. Among companies that did receive tips, 66% investigated them internally through their compliance departments or their legal counsel.

Excelling at Due Diligence

Rigorous due diligence—especially with regard to external parties (suppliers, consultants, business partners), M&A transactions, and potential new hires—can play a critical role in combating corruption. In general, survey respondents were confident about their companies’ due diligence processes: 11% were “extremely confident”; 44%, “very confident”; and 39%, “somewhat confident.” But not all respondents said their companies take a proactive approach to due diligence. For example, 11% said they never conduct due diligence on M&A targets; 10% never do so on third-party agents or consultants; and a number of respondents said they never conduct such reviews on suppliers (9%) or prospective new employees (7%). Reasons may include important limitations to such processes as cited by respondents, such as lack of full access to information (noted by 54% of participants), the large number of third parties that their companies needed to review (41%), the cost of such processes (37%), and shortages in staffers with the right expertise to assess third parties (36%).


The information contained in this article is also subject to the terms, limitations and assumptions contained in the Combating Corporate Corruption: The 2015 Anticorruption Survey, a copy of which can be provided upon request, including those assumptions, disclaimers, and other limitations contained in that survey.

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