Corruption risk assessments vital for organisations across Asia

As director of analysis at global risk and strategic consulting firm Control Risks, John Bray (pictured) is not easily shocked. But even he was disturbed by some of the findings of a Control Risks survey of general counsels, senior corporate lawyers and compliance heads in more than 300 companies around the world.

Bray said that it was clear from the results of the 2013 International Business Attitudes to Corruption survey that many organisations were falling well short of best practice in their anti-corruption compliance programs.

“The compliance cup is only half full, and very few companies seem to be doing what we would regard as proper training,” he told SR. “The compliance train is moving slower than we might expect.

“This applies even to what we would think of as the elementary requirement to have a well drafted policy statement. Many companies do have anti-bribery policy statements, but there is a very significant number that don’t.”

Operational bribes
Bray, who specialises in formulating anti-corruption strategies for companies and government agencies, said another striking finding of the survey was in the area of operational bribes.

“When we gave company lawyers a list of five headaches and asked them what their two biggest headaches were, the one at the top of the list was ‘demand for bribes to get things done and keep your operation running’. And that does fit in with our consultancy experience,” he said.

“At first sight, it’s counter-intuitive because big enforcement actions are about big bribes to pay business. That’s appropriate but it’s not the whole story. Getting things done is the other part of the story.”

Indeed, the report states that resisting demands for small bribes required businesses to show a combination of concerted top-level leadership and day-to-day ground-level determination and ingenuity. “This is likely to be a major challenge for years to come and, as such, it is right that it should rank so high on the corporate agenda,” it concludes.

International enforcement
Bray said Control Risks’ international clients were most concerned with international enforcement.

“So [that means], in order of priority, the UK Foreign Corrupt Practices Act, UK Bribery Act and, a somewhat distant third, the Australian Criminal code and similar extraterritorial laws from other OECD countries,” he said.

“We’re also saying to clients, don’t forget about domestic enforcement. Political risk assessment, monitoring and those types of things are all the more important in the light of enforcement actions.”

Japan-based Bray said that companies should avoid paying bribes for the simple reason that it’s “inefficient and costly and [can cause] reputational damage”.

“Furthermore, you need to be actively striving to meet international standards, understanding that local standards are moving in that direction as well,” he said.

Bray gave China as an example of a country in which government initiatives to combat official corruption had begun to make an impact. “But you need to be looking at its regions and at specific sectors and commercial deals,” he added.

“China, India and Indonesia are all big countries; they vary quite a lot by region and sector, so things tend to be harder the further away you get from the capital or from the main business areas.”

Cry of anger
Another recent study conducted in this area is the Global Corruption Barometer 2013 report released by the civil society organisation Transparency International (TI).

The survey of more than 110,000 respondents in 107 countries, addresses people’s direct experiences with bribery and details their views on corruption in the main institutions in their countries.

Bray said that in those countries in which households report trouble with bureaucrats, “businesses also tend to have hassles dealing with government services that are not as efficient as they ought to be”.

Bray said that while the TI survey focused on “the view from the household”, it could still be valuable to risk managers.

“The corruption barometer is a cry of anger – in some countries, a cry of pain – and some of those cries are echoed in business circles,” he said.

Corruption risk assessments for individual companies need to be more specific and focused’

“Firms should take note, but corruption risk assessments for individual companies need to be more specific and focused. For a practical risk assessment, you do need to think about the country environment and to be much more focused on your sector, as well as the risks associated with individual transactions. Defence, mining and other sectors all have their own distinctive problems.”

Bray said that while it was striking that most of the respondents were pessimistic about corruption issues in their country, it was “not entirely a bad news story”.

“It means there has been more media coverage, and therefore people are more sensitised to the issue,” he said. “In the long run, that’s not such a bad thing, but it does reinforce the need for companies to be very clear that their own houses are in order.”