Corruption is costing companies business, but they are curtailing risk by using data, according to AlixPartners annual anticorruption survey
AlixPartners, the global advisory firm, today released its 5th annual global anticorruption survey. Intended to determine the impact of corruption on the global business environment and understand ways in which companies are dealing with corruption risk, the survey shows that companies continue to be concerned with corruption risk and have increasingly stopped doing business with certain partners (42%, up from 32% last year) or lost business (31%, up from 23% last year) due to corruption risk. Respondents included corporate counsel, legal and compliance officers from more than 20 major industries in the United States, Europe and Asia.
Data viewed as being critical to investigations, but still poses challenges
The survey found that 87% believe their companies use data successfully to identify possible corruption. Across all industries and sectors, data and system security continues to present concrete opportunities in 2017, with 67% of survey respondents using real-time monitoring for suspicious activity.
“Technology continues to be a useful tool as many companies use real-time monitoring and data analysis to weed out suspicious behavior,” said Harvey Kelly, Managing Director and Global Leader of AlixPartners’ Financial Advisory Services practice. “However, with technological advances and more data comes larger challenges, such as ensuring data safety, especially across borders.”
Although 87% of respondents believe their companies are successful in using data to identify possible corruption during cross-border investigations, the survey finds that the biggest challenge to tackling corruption risk is the volume of information that companies must contend with, which includes lack of integrated systems (75%) and ensuring data security (74%).
Dealing with data across country borders is also expected to pose steady or increased challenges in the year ahead for nearly all survey respondents. In addition, dealing with local data protection laws poses a problem for nearly half of respondents when they need to collect and analyze data.
Although the majority of respondents feel confident in their due diligence processes, with 49% being very or extremely confident, the survey found that the biggest limiting factors to effective due diligence are multiple business partners (44%), time pressures (39%) and difficulty in accessing information (37%).
Opportunities ahead: internal audits and anticorruption compliance policies
In response to the heightened enforcement environment in recent years, companies have adopted more controls and compliance policies. A higher percentage of companies today have implemented a dedicated anticorruption program in the past 10 years (60%) and 76% have reviewed their policies within the last year (up from 67% in 2016). Also on the rise, respondents said their compliance programs specifically addressed FCPA laws (59%) and OFAC laws (51%).
Among the most successful measures implemented to reduce corruption risk, internal audits and anticorruption compliance policies take the lead for survey respondents (84%). Training is also considered effective for 81% of them.
Whistleblower programs continue to be a key tool in identifying and dealing with corruption risk; 95% of companies said they have a process in place for handling whistleblower reports. These hotlines seem to be working too, with 37% of survey respondents indicating they have received a tip related to bribery or corruption, up from 27% in AlixPartners’ 2016 survey.
Corruption is a lingering problem
Based on the survey, no industry is immune to corruption today. 86% of respondents said their industries are exposed to corruption risk, compared with 90% in 2016; of these respondents, 27% and 28% described this risk as “significant” in 2017 and 2016, respectively.
Respondents also said that it is becoming tougher for their companies to steer clear of potential risk. 67% believe there are locations where it is impossible to avoid corrupt business practices, namely Russia (35%), Africa (33%) and China (27%).
Unfortunately, corruption risk around the globe appears unlikely to dissipate any time soon, due to the ineffective corruption laws in some regions. Respondents said Africa had the worst anticorruption laws (81%), followed closely by Russia (73%).
“It’s clear that companies continue to take corruption concerns very seriously and are performing extensive due diligence when it comes to doing business in certain parts of the world,” added Kelly.
About the 2017 AlixPartners global anticorruption survey
The AlixPartners Global Anticorruption Survey was conducted from November 2016 through December 2016. The survey polled corporate counsel, legal, and compliance officers about their companies’ anticorruption efforts, compliance policies and ways of identifying and mitigating corruption risk. The survey group consisted of executives at international companies with annual revenues of $150 million or more, representing more than 20 major industries based in the United States, Europe and Asia.
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