Corruption Continues to Pose a Major Obstacle to Global Trade - Global Trade Magazine
  October 15th, 2015 | Written by

Corruption Continues to Pose a Major Obstacle to Global Trade

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  • 40 percent of companies surveyed said risk of corruption led them to pull out of deals.
  • Companies need to do more due diligence early on in any negotiation or market entry planning on no-go areas.
  • 81 percent of companies surveyed agree that anti-corruption laws improve the business environment for everyone.

Despite increased global efforts to curtail it, “corruption remains a significant obstacle to international businesses,” according to London-based business consultancy Control Risks’ recently published annual survey of business attitudes to corruption.

Almost one-third of the respondents reported losing out on deals to corrupt competitors with an equal number saying they’d decided not to conduct business in specific countries because of the perceived risk of corruption, the survey found.

In addition, four out of ten reported that the risk of corruption was the primary reason they pulled out of a deal on which they had already spent time and money.

Despite the findings, the picture “is improving as companies from countries with tight enforcement report fewer losses than before from corrupt competitors.” This year, 24 percent of the U.S. companies surveyed said they had lost out to corrupt competitors compared with the 44 percent who responded in the affirmative in 2006, a percentage matched in both the UK and Germany.

“Governments and companies across the world are increasingly aware of the importance of countering corruption, with China and Brazil in particular stepping up enforcement in the past year,” said Control Risks CEO Richard Fenning.

Nevertheless, “Too many good businesses are losing out on opportunities to corrupt competitors, or choosing not to take a risk on an investment or entering a new market in the first place for fear of encountering corrupt practices.,” he added.

Companies, he said, “need to find a balance and do more due diligence early on in any negotiation or market entry planning, to spot the points of light in countries that may otherwise appear as no-go areas.”

When asked whether international anti-corruption laws “improve the business environment for everyone,” 81 percent of respondents to the survey agreed.

“There are still wide variations in the maturity of company programs in place to deal with corruption. In the worst case, conventional compliance approaches can actually increase risk because they lead to a misguided sense of complacency,” the survey found.

The findings suggest companies “are not setting the right incentives to deter corruption” with the parity between financial targets and anti-corruption targets seen as “vital to ensuring compliance is embedded into a company’s culture.” Respondents also cited the fear of negative consequences as the incentive most commonly used to deter corrupt behavior.

“Something we’ve heard from our clients – even companies with strong compliance programs – is that they struggle to foster a culture of ethics and integrity within their organizations,” said Greg Esslinger, senior managing director of Control Risks’ Compliance, Forensics and Intelligence practice in the Americas.

Many companies in the survey, he said, “viewed compliance programs as a competitive advantage in challenging jurisdictions. But to really enjoy that advantage requires more than just a good program. It requires a corporate culture that values integrity and ethical behavior.”


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