Companies inadequately addressing corruption avoidance, Mexico at risk in 2015

December 30, 2014

Risk management is a key component of a business's structure. Compliance is one of the ways in which companies deal with these risks, which can come from a variety of sources. Some of these mechanisms are required for businesses to engage in commerce over state lines or overseas, but there are also internal compliance schemes that are aimed to prevent corruption from occurring within a firm. Based on a recent report, many companies aren't going to the proper lengths to ensure that underhanded dealings that occur in-house are avoided.

In a new analysis performed by risk consultancy firm Control Risks, in a survey of approximately 640 companies, more than 50 percent were found to be "ill-prepared to conduct anti-bribery investigations of employees," the report found. Additionally, it noted that many were still not providing training for employees operating in positions where bribery or corruption may be tempting, such as in sales.

"The findings point to a disconnect between what head offices believe about the adequacy and effectiveness of their anti-corruption program and what actually happens in the higher-risk market," the Control Risks report stated. "This is the 'remote office' problem."

It added that while this sometimes results out of a legitimate unawareness of what behaviors and actions can be construed as corrupt but on other occasions it is done out of willful ignorance. Neither of these excuses, however, will hold water should employees be prosecuted by regulators.

Richard Fenning, Control Risks CEO, pointed out that it's not a matter of businesses not having compliance programs. In fact, 88 percent of companies polled had policies that ban employees from taking or providing bribes. The problem is that these programs aren't comprehensive enough and need to be more about prevention rather than bluster or rhetoric.

"Companies are getting better at talking the talk," said Fenning. "They need to walk the walk, and introduce the real changes in culture and process [automation] that will protect them. Without this, there is a real risk of companies sleep-walking into a major crisis."

Most don't believe they'll have to investigate corruption in coming years
Despite evidence pointing to the contrary, more than half of respondents said that they think their programs are effective enough to prevent them from having to investigate cases in which corruption may occur over the next two years.

While no industry is immune to corruption, the illegal behavior has been more common in some lines of work. In a review of foreign bribery cases stretching from 1999 to 2014, the Organization for Economic Cooperation and Development found that two-thirds of cases occurred in extractive industries, construction, transportation and storage as well as information and communication, the Wall Street Journal reported.

The Foreign Corrupt Practices Act, which was created in 1977 by the U.S. Congress, was passed and signed into law as a means of stopping bribery of foreign officials. The FCPA is strictly enforced and has forced numerous companies to pay millions of dollars in penalties for running afoul of the law.

"Conducting business transactions with companies and consumers in foreign countries, especially in Latin America, serve as tremendous opportunities for growth," said Scott Lewin, Invoiceware International CEO. "But executives must ensure their business processes are vetted, so no gaps exist. Unfortunately, more than 90% of multinationals don't realize that their system of record for accounting processes are not their global ERP solutions in which they have invested millions and millions of dollars. Instead, they are relying on local, bolt-on 3rd party solutions that allow changes to invoices and avoidance of governance and corporate policies."

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