AlixPartners Global Anti-Corruption Survey 2014
In spite of efforts by many companies around the world to adopt compliance measures aimed at preventing corrupt activities, bribery and corruption risk remain widespread, posing both competitive and regulatory threats to businesses. In fact, 30% of companies in North America, Europe and Asia report that they ceased doing business with a partner due to possible corruption risk, with Africa and Russia being perceived as the areas representing the greatest risk. That’s according to a survey of general counsel and compliance officers at companies in North America, Europe and Asia released today by AlixPartners, the global business advisory firm.
The poll also found that 70% of companies have not avoided doing business in a region or country despite possible exposure to corruption risk. The survey in addition revealed that 15% of executives say their companies pulled out of an acquisition as a result of possible corruption at the target company.
“This research highlights the fact that despite continued efforts by companies to address anti-corruption, these risks remain pervasive – risks that are of particular concern given recent increases in cross-border enforcement,” said Harvey Kelly, global leader of AlixPartners’ Financial Advisory Services unit and Corporate Investigations Practice.
Despite More Compliance Programs, Challenges Persist
Eighty-five percent of respondents indicated that their companies have formal, written anti-bribery and anti-corruption policies. According to the survey, company-established hotlines represent an effective tool to identify compliance risks, and 22% of respondents said they received a tip related to bribery or corruption through their company’s hotline during the past 12 months. Respondents pointed to internal audits, employee training and greater oversight of books and records or internal controls to identify potentially improper payments as practices that have been the most effective at reducing risk.
The surveyed executives said that the biggest challenges in their anti-corruption and anti-bribery efforts were staffing constraints, the need to develop policies that are tailored to the countries in which the companies do business and pressure to deliver operating results.
“Growth internationally is strategically imperative for many companies; however, tougher enforcement of anti-bribery regulations has added a layer of complexity to decision-making,” said Kelly. “Effective anti-corruption compliance programs can enable companies to continually assess risk exposure and address potential problems early on.”
Perception Gap between U.S. and European Companies
Although a majority of respondents at U.S. and European companies (92% and 65%, respectively) indicated that corruption risk is present across a wide range of industries, there was a perception gap between the two when it came to the severity of that risk. Only one in five respondents at European companies said their industries are exposed to significant corruption risk, compared with 40% of respondents from U.S. companies saying that. European respondents stated their companies were also less likely to perform due diligence on prospective employment candidates on a regular basis, as just 29% of European respondents said they did so, compared with 63% of U.S. respondents, the survey noted.
The survey found that a significant majority of U.S. companies have anti-corruption policies, and nearly all (98%) of these policies are designed to address the U.S. Foreign Corrupt Practices Act (FCPA). These respondents also reported that internal audits and “setting a tone at the top” have been effective in reducing risk.
Asian Companies Perceive Risk across Industries
According to the survey, 80% of executives at Asian companies said their industries are exposed to significant corruption risk. A majority of these respondents (54%) said corruption risk is unavoidable in Southeast Asia (Indonesia, the Philippines and Vietnam). According to the survey, 63% of companies in Asia have whistleblower hotlines. Among the measures taken to reduce risk, respondents said they placed the most emphasis on employee training, internal audits and training-measurement systems.
“This research shows that bribery and corruption are on the radar at many Asian companies and that they are implementing into their compliance programs tools such as reviews of accounting books to identify illegal payments,” said Mike Murphy, managing director at AlixPartners and leader of the firm’s Asia-Pacific Restructuring and Financial Advisory Services Practice.
About the Survey
The AlixPartners Global Anti-Corruption Survey was conducted in November 2013. It polled general counsel, compliance officers and other related company executives about their companies’ anti-corruption efforts, compliance policies and at identifying and mitigating corruption risk. The survey group consisted of executives at international companies with annual revenues of $150 million or more in a broad range of industries based in North America, Europe and Asia.
AlixPartners is a leading global business advisory firm of results-oriented professionals who specialize in creating value and restoring performance at every stage of the business lifecycle. We thrive on our ability to make a difference in high-impact situations and deliver sustainable, bottom-line results. The firm’s expertise covers a wide range of businesses and industries whether they are healthy, challenged or distressed. Since 1981, we have taken a unique, small-team action-oriented approach to helping corporate boards and management, law firms, investment banks and investors respond to critical business issues. For more information, visit www.alixpartners.com
AlixPartners February 12, 2014