Minimizing the risk of corruption costs companies business, and companies are working to reduce risk by using data in their corruption risk mitigation strategies, are two key findings from AlixPartners’ annual anticorruption survey.
The results of the survey, conducted to determine the impact of corruption on the global business environment and to gain a better understanding of how companies address corruption risk, show that executives continue to be concerned with corruption risk and have stopped doing business with certain partners (cited by 42 percent of the respondents, up from 32 percent last year) or lost business (cited by 31 percent of the respondents, up from 23 percent last year) due to corruption risk. Interestingly, 87 percent of the respondents said they believe their company uses data successfully to identify possible corruption. Furthermore, across all industries and sectors, data and system security continue to present opportunities for addressing the risk of corruption, as 67 percent of the respondents indicated their company uses real-time monitoring for suspicious activity.
Respondents to the survey included corporate counsel, legal and compliance officers, who were asked about their companies’ anticorruption efforts, compliance policies and ways of identifying and mitigating corruption risk in the supply chain. Those executives are at international companies with annual revenues of $150 million or more, representing more than 20 industries based in the U.S., Europe and Asia.
“Technology continues to be a useful tool as many companies use real-time monitoring and data analysis to weed out suspicious behavior,” says Harvey Kelly, Managing Director and Global Leader of AlixPartners’ Financial Advisory Services practice. “However, with technological advances and more data come larger challenges, such as ensuring data safety, especially across borders.”
It isn’t surprising to see that the survey results show the biggest challenge to minimizing corruption risk stems from the sheer volume of information that companies must contend with, which includes lack of integrated systems (cited by 75 percent of the respondents) and ensuring data security (cited by 74 percent). I was also interested to see that although 49 percent of the respondents said they are “very or extremely confident” in their company’s due diligence processes, the largest limiting factors to effective due diligence cited by respondents are multiple business partners (44 percent), time pressures (39 percent) and difficulty in accessing information (37 percent).
Internal audits and anticorruption compliance policies are chief among the most successful measures cited by respondents as a means to reduce corruption risk. Indeed, 84 percent of the respondents said their company uses internal audits and has anticorruption compliance policies in place. Another key practice is increased training, cited by 81 percent of the respondents.
Finally, I was somewhat surprised to see just how many respondents said whistleblower programs continue to be a key tool in identifying and dealing with corruption risk: 95 percent of the respondents said their company has a process in place for handling whistleblower reports. What’s more, these hotlines seem to be working—37 percent of the respondents indicated they have received a tip related to bribery or corruption, which is up from 27 percent in last year’s survey.
More than a quarter of the respondents said their industry is exposed to “significant” corruption risk, which makes me wonder what you think of corruption in your industry. Do you consider corruption to be a significant risk in your industry or supply chain? Secondly, does your company use internal audits and anticorruption compliance policies as part of its corruption risk mitigation strategy? Does it also have a whistleblower program in place?