Executives say bribery and corruption remains part of doing business in some countries, yet the majority continue to operate in such places without enhanced due diligence and internal control, according to a new report.

KPMG says nearly three quarters (73%) of UK senior compliance executives believe corruption is endemic in certain areas of the world, of which nearly a third (32%) acknowledge that not doing business in those countries is a way of avoiding bribery and corruption risks, according to a survey carried out internationally by KPMG.

Commenting on the findings, Brent McDaniel, head of KPMG’s UK Anti-Bribery and Corruption practice, said: “Rather than sidestep certain markets, our survey finds that many leading companies have implemented risk mitigation programs that range from increased employee training about ethical cultures and doing the right thing, to enhanced internal controls and keeping a closer eye on operations.

“Companies that chose education and enhanced controls were able to enter and operate in more diverse markets, while others simply limit their potential.”

The survey found that companies operating in countries with corrupt reputations face significant challenges, such as having the ability to adequately investigate the backgrounds of local business partners and dealing with the growing variety of foreign laws and regulations.

According to the survey respondents, despite the known compliance risks of working with third parties in some countries, the survey found:

• Two in five UK and US organisations with written anti-bribery and
corruption policies do not distribute them to agents, distributors, vendors, brokers, joint-venture partners or suppliers.

• Three in five companies with such compliance programs that incorporate employee training do not require any third-party representatives to participate in the training.

• Nearly one in four UK and one in three US companies require training less than once a year.

• Three in five companies do not exercise “right to audit clauses” in third party contracts.

• 10% of the UK companies and more than half of the US companies do not obtain periodic compliance certifications from those with whom they do business in other countries.

The KPMG survey also pointed to significant shortcomings in how companies develop, implement and maintain anti-bribery and corruption policies:

• One in five respondents said their companies don’t have communication and training programs.

• One in two of the respondents’ organisations does not have a committee responsible for overseeing anti-bribery and corruption compliance.

• Three in five UK and three in four US. respondents said their organisation does not have a full-time dedicated anti-bribery and corruption compliance officer.

• A third of the companies do not perform anti-bribery and corruption risk assessments.

“Many multi-national companies seeking to expand their markets or supply chains to certain areas of the world often are met there by an official with their hand out looking for a bribe or some other favour,” said McDaniel.

“Doing the right thing becomes even more difficult when facing increased stakeholder expectations for a better return on investment that requires continued expansion to remain competitive in an increasingly global society.”

In addition, while both countries now have stringent anti-bribery and corruption laws – the UK Bribery Act of 2010 and the US. Foreign Corrupt Practices Act of 1977 (FCPA) – the KPMG survey found that only 43% of US executives said their programs comply with the UK Bribery Act, while 46% of UK executives say theirs complies with FCPA.

In addition, nearly 80% of US. respondents said they still had little to no knowledge of the UK Bribery Act’s provisions, while 32% of the UK executives said they still didn’t understand the UK law’s requirements.

Finally, only 9% of UK and 13% of US respondents said their organisations allowed facilitating payments; the balance either prohibiting them outright or allowing them to be made only for personal safety concerns.

The introduction of the UK Bribery Act is now less than one month away.

Share Story: