Nearly two-thirds of senior executives around the world say they have experienced some form of actual or attempted corruption in their business dealings, according to a report by PricewaterhouseCoopers LLP. The report ‘Confronting Corruption: The business case for an effective anti-corruption programme’ finds that almost 80 % of executives say they have anti-corruption programmes in place at their company, but only 22 % are confident the programs are effective. PricewaterhouseCoopers commissioned the Economist Intelligence Unit to conduct a global survey and in-depth interviews with senior executives and anti-corruption specialists. Survey respondents, comprised of 390 senior executives from 70 countries, indicated the significant operational impacts of corruption:

• 63 % said they had experienced some form of actual or attempted corruption;
• 45% said they had not entered a specific market or pursued a particular opportunity because of corruption risks;
• 39% said their companies had lost bids because of corrupt officials; 41% said their competitors paid bribes.

Executives say they feel particularly vulnerable to corruption when doing business in expanding markets such as China, India, Russia and South America. In addition, 70% of the executives surveyed stated that a better understanding of corruption would help them compete more effectively, make better decisions and improve corporate social responsibility as they enter new business environments. This sentiment is further backed up by the UK responses to PricewaterhouseCoopers recent Global Economic Crime Survey citing that nearly half (49%) of UK fraud cases involve an overseas party. The possible impact of economic crime is considered a significant factor in about half of investment decisions, with 90% of UK respondents citing corruption as their major concern when doing business with emerging economies.

Andrew Gordon, partner, forensic services, PricewaterhouseCoopers LLP said:

“The rapid growth of corruption and bribery as a form of fraud in the UK underlines the increasingly globalised business world in which we operate. As emerging economies become increasingly important business partners, companies now have a compelling business case to support the development and implementation of a formal and strategic anti-corruption programme.

“In recent years, companies caught breaking anti-corruption laws have individually paid hundreds of millions of dollars in fines and several chief executives have stepped down in disgrace. This situation is not limited to UK companies. Globally, we are seeing a marked rise in enforcement actions that should cause C-Suite officers to ensure they have adequate programmes in place to mitigate this risk.”

In addition to the obvious monetary damages corruption causes, the damage to a company’s reputation is also of major concern. When asked about the fallout from corruption allegations, 55 % of respondents to the survey say the most severe impact would be to their corporate reputation - a greater percentage than the combined total of those who say legal, financial and regulatory impacts would be the most severe.

Andrew Gordon partner, forensic services, PricewaterhouseCoopers LLP continued:

“As management and staff become distracted and demoralised, customers and business partners distance themselves from the company and even internal safeguards against such things as theft and financial statement manipulation eventually become suspect. Without a strategic action plan in place, a company may not even be aware of its vulnerability until it is too late.”

While companies are generally responding to the risk of corruption, the survey indicates that many companies’ underlying policies and controls do little to identify and mitigate risk due to poor design or implementation:

• Slightly less than half say their programme is clearly communicated and enforced;
• Rigorous risk assessment, a crucial step in programme design, is overlooked by more than half of those surveyed, and only 25 % perform proactive risk assessments or monitoring;
• Only 40 % of respondents believe their current controls are effective at identifying high-risk business partners or suspect disbursements.

It is not, however, all bad news; drawing from interviews with experts and real life case studies from global companies, the report provides practical guidance for operating in challenging environments. Leveraging efforts by leading non-governmental organisations focused on the issue, the report also includes a model for an effective anti-corruption programme that can be tailored to any environment.