Corruption Prevention: A Private Solution for a Global Problem
In recent years there has been a significant shift in the perception and acceptance of corporate misconduct. Having once been treated as a rather trivial offence, corruption is now seen as a serious criminal act and many international corporations are being sued for their corrupt practices. However, despite heavy fines and jail sentences, corruption persists.
In an ideal world, the responsibility to stop corruption would be shared between the private sector, civil society, and governmental institutions. Fighting corruption on all three levels is essential if we are to eradicate corruption entirely. However, in the real world, private companies need to take charge and focus on what they can do from within their organisations to prevent and fight corruption.
Internal Measures to Prevent Corruption
The single most important step companies can take to successfully fight and prevent corruption is to create and implement a well-structured compliance system. Building your reputation as an ethical and compliant business entity becomes a competitive advantage in the international market where the environment is still corrupt, as consumers are actively looking to spend their money at cleaner businesses. Unfortunately, the misconception that corrupt practices are normal, and therefore right, is an idea that persists in the international market.
Below are the guidelines set out in the UN global compact anti-corruption programme to help companies to easily design and implement a tailored compliance system that is viable for all companies from SMEs to some of the world’s largest corporations.
A company must make the conscious decision to commit itself to contribute towards a corruption-free world. The first step in making this commitment is for the owners of a company to have an ethical sense of the damage that is being done to the world through corruption and feel obligated to play an active role in stopping it.
Owners need to be publicly dedicated to an ethical model of business and display an ethical and moral standard that inspires their employees. Leading by example and displaying a strong commitment to ethical practices will inevitably filter down the business and ultimately informs the decisions and actions of its employees and helps to create an ethical corporate culture.
Risk assessment is at the heart of any corruption prevention programme, but it is especially important for small to medium size companies. Normally SME’s don’t have colossal budgets to dedicate to anti-corruption efforts and as a result, need to focus their money on the areas that are most important. Conducting a risk assessment will help to pinpoint these areas and allow organisations to use their money more efficiently and to focus on the issues that really matter to the company.
There is not a one-size-fits-all risk assessment for all companies because every company is unique and will face different risks. Risk can come from external factors such as doing business in a country that has poor law enforcement or from internal factors such as having a sales department with a large budget and poor oversight.
Once the risks have been identified they need to be ranked in order of the most severe to allow the company to focus on working only on the most important risks. Only after the risks have been examined and strategically prioritised can a business start to design and take measures to eliminate them or minimise them.
When developing an anti-corruption compliance system, you need to define all the practical elements that will be needed for successful implementation. Anti-corruption compliance programmes often have many different moving parts including employee training, business partner training, setting up policies and procedures, defining monitoring controls and many more.
Once again, how you identify these elements will really depend on the risks you are facing as an organisation. A risk assessment can be broken into 4 stages:
- Interviewing the key stakeholders to check for bribery risks and red flags
- Checking for issues with compliance in the past and figuring out why they happened and how to prevent them
- Examining audit reports by both internal and external sources for signs of non-compliance in certain areas
- Checking the broader legislative trends to get an understanding of the outlook towards corruption your country has.
In the past, the implementation of a compliance programme entailed educating staff on written policies created to address compliance issues through training and that was the end of it. If there is one thing that the constant bombardment of corruption scandals in the news has taught us it is that this approach is not enough to curb corruption.
Implementation has been redefined to encompass more than just the rolling out of a compliance programme. Successful implementation also means being aware of whether the policies that have been put in action are working or not. For a programme to be effective it needs to be embedded into the everyday business practices of a company.
Corruption often happens at the forefront of a business and because of this to implement a successful programme all divisions of a company need to be involved. Each division should take equal responsibility for making sure that there are no bribes being paid or accepted by anyone in their department.
Between a year and 18 months after implementing a compliance programme it is time to check-in and measure its efficiency. Setting up compliance programmes can be expensive and resource intensive. It is important to get feedback on the programme to be able to make informed adjustments. This means measuring if the programme has reached its employees. One way to make this step easier is to make use of compliance software to keep track of your programme.
When it comes to measuring the efficiency of a programme two questions need to be answered. First, are the new regulations being followed by the employees? And secondly, are the new measures still up to date? Over a period of 12-18 months, new companies in new countries may have been acquired with different compliance laws, and as a result, a company’s risk profile may have changed.
Communication is extremely important in implementing a compliance programme. Management needs to communicate which compliance measures the company has taken to its employees and why they are necessary. Without effective communication, employees won’t know what to do or why they must do it. You need good communication from top and middle management to create a compliance culture.
It is not simply because it is the law that companies should be compliant. Companies should be compliant because it is an important part of establishing a successful and sustainable business. You cannot be successful for a long time if you have a bad reputation and are constantly afraid of being caught. The importance of compliance to the overall business should be communicated with individuals at all levels within a company to ensure that employees understand why they must react a certain way.
When it comes to corruption, it is certainly true that prevention is the best medicine. The steps discussed above are necessary to get a solid start in the fight against corruption but are not sufficient in themselves to stop it. For corruption to be eradicated there needs to be a commitment by the private sector to doing business in a clean and honest manner. A zero-tolerance attitude towards corrupt entities by the public. And last, but certainly not least, clearly defined and thoroughly enforced laws on both a national and international level.