Control Risks associate director compliance intelligence investigations and technology in Germany, Hana Lešenarová warns of boardroom misperception over corruption risks

Many organisations underestimate the risk of an anti-corruption investigation even when they have recently been subject to such an investigation, according to a recent survey1 of 638 legal and compliance leaders.

When respondents to the global International business attitudes to corruption survey 2014/2015 were asked whether they expected to conduct an anti-corruption investigation of an employee in the next two years, almost half thought that this was very unlikely (44.2%), compared to only 8.2% who thought an employee investigation was ‘almost certain’. This was in spite of the fact that 56.6% of respondents had conducted an internal anti-corruption investigation in the past two years. This indicates that some companies could be unprepared for an investigation.

Many organisations have an excellent compliance programme in place. They have devoted a lot of resource to it and put their employees through anti-corruption training. Yet in reality, this may well be mere ‘paper compliance.’

Lack of proper communication can seriously hinder companies’ success in tackling corruption risks, as does their failure to implement the relevant policies across all levels and to adequately penalise any violations. Also, organisations may be training all their employees but are not paying enough attention to employees who are exposed to a particular corruption risk such as people in sales or procurement departments.

There is often a lack of direction from the top when it comes to anti-corruption. The board of directors or board-level compliance committees in less than half (47.5%) of companies have a specific responsibility for anti-corruption. This was confirmed by the Organisation for Economic Co-operation and Development’s (OECD) Foreign bribery report’2, which commented that in the majority of foreign bribery cases, management (41%) or the chief executive (12%) were aware of the bribery, demonstrating, the need for strong direction from the top in implementing corporate anti-bribery policies.

Anti-corruption is becoming a pressing concern as investigations are starting to become prominent. Although the US has traditionally been the most active country in investigating corruption, other regions including emerging markets such as Brazil and China, are also pushing the anti-corruption agenda.

Intermediaries are the weakest links

Organisations also tend to underestimate the risks associated with third parties. More than half of respondents thought that an investigation of a third party was either “very unlikely” (27.6%) or “somewhat unlikely”.  Having a no-bribe clause in a contract is not sufficient and thorough checks into intermediaries are crucial given the part they generally play in corruption cases. As the OECD survey revealed, intermediaries were involved in three-out-of-four cases of foreign bribery.

Businesses looking to operate in environments with high corruption risks should plan their investment more carefully. Only 38.2% of companies carry out a pre-entry anti-corruption risk assessment. These assessments may help clients identify and measure the risks so that they can tailor their considered investments accordingly.

Remote office problem

Most companies believe they have a great compliance programme and workforce in place but the seriousness of anti-corruption risks are not making their way back to head office. This may be because local employees do not fully understand their anti-corruption programme or may even seek to protect their own interests and so refrain from taking responsibility for anti-corruption issues. In addition, local offices may feel they are in a better position to compete against others if they do not follow their anti corruption programmes, because their competitors may not have strong internal anti-corruption policies.

Anti-corruption programme can in fact be good for business. In one case, an international company screened 300 of its suppliers in Russia for any corruption and other risks. The company feared that if any potential risks were found it could lose a substantial number of suppliers and business. In fact, as the suppliers became aware of the process, they were keen to pass the test and get on the clean list.

In a global marketplace, corruption is a real issue. Organisations that get a grip on the issue across all their remote office and supplier relationships will be best placed to satisfy the regulators and operate in an environment where corruption is less likely to present a major risk to the future of the business.

Hana Lešenarová, associate director compliance intelligence investigations and technology, Control Risks, Germany


[1] The global survey International business attitudes to Corruption survey 2014/2015 published by Control Risks was conducted in June and July 2014.  638 respondents were surveyed, of which more than half (56%) were chief legal officers, general counsels, or executive level in-house counsel. Nine-and-a-half percent were lawyers from private practice and the remainder included: directors/heads of compliance, heads of risk, heads of audit and company secretaries. The best-represented individual countries were the US (107 companies with US headquarters) and the UK (96 companies with UK headquarters). The respondents also included significant numbers from the emerging economies of China (51), Brazil (46), Mexico (44) and India (29).