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  March 15th, 2016 | Written by

Corruption Continues to Strangle Global Trade

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  • Companies struggle to foster a culture of ethics and integrity consistently across their organizations.
  • Many companies view trade corruption compliance programs as a competitive advantage.
  • Many businesses choose not to enter a new market for fear of encountering corrupt practices.

Despite increased global efforts to curtail it, corruption remains a significant obstacle to international business, according to the most recent annual survey of business attitudes to corruption published by Control Risks, the global business risk consultancy.

According to the survey, corruption is still a major cost to international business with 20 percent of U.S. companies – compared to 30 percent globally – reported losing out on deals to corrupt competitors.

In addition, it found bribery and other corrupt activities “continues to deter investors” with one-in-three U.S. and global companies surveyed saying that they had decided not to conduct business in specific countries because of the perceived risk of corruption.

But, according to Los Angeles-headquartered Control Risks, the global picture is improving “with companies from countries with tight enforcement report fewer losses than before from corrupt competitors.”

In 2006, 44 percent of U.S. companies said they had lost out to corrupt competitors, compared with only 24 percent in 2015, and when asked whether international anti-corruption laws “improve the business environment for everyone”, 87 percent of U.S. and 81 percent of global respondents agreed.

Despite the improvement, though, the survey findings suggest companies are not setting the right incentives to deter corruption.

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

The survey findings, he said, “are consistent with those anecdotes” with many companies in the survey “viewing compliance programs as a competitive advantage in challenging jurisdiction – but to really enjoy that advantage requires more than just a good program. It requires a corporate culture that drives and measures integrity and ethical behavior.”

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

Nevertheless, he said, “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.”

Companies in the global arena, 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.”