Are multinational companies sleepwalking into compliance disasters?

Control Risks, the global business risk consultancy, has published its annual survey of business attitudes to corruption.

The 2014/15 survey concludes that many global companies, particularly those with operations in emerging markets, remain slow in changing their corporate approach towards corruption. There is a worrying disconnect between what the headquarters of large multinational organisations believe about their anti-corruption programmes and the reality of what is actually going on at the front line in the higher risk markets. The failure to reform internal practices is partly due to budgetary pressures on compliance teams but many companies still underestimate the threat and the cost of getting it wrong.

There have been some improvements over the past 12 months. Overall, 87.9% of companies now have policies explicitly banning bribes to secure contracts. 44.8% of UK companies said they were investing in additional resources to combat corruption compared with a global average of 37.9%.

But a majority of the global companies surveyed are:

• ill-prepared to conduct anti-bribery investigations of employees

• have no board level responsibility for anti-corruption

• still not providing anti-bribery and anti-corruption training programmes for those operating in high-risk functions such as sales

• and just under a half still have no whistleblowing line

Over the past year many emerging markets have joined the developed world in calling for higher standards and tighter enforcement. 2014 has also seen international companies prosecuted in China, a tougher anti-corruption regime in Brazil and India strengthening its anticorruption institutions. Given increasing willingness on the part of governments in emerging markets to strengthen their compliance and enforcement processes, the shortcomings identified in this survey pose a significant risk for companies. An anti-corruption investigation against a company can threaten its survival and impose significant cost both financially and to a company's reputation. Are too many companies ill-prepared for disaster?

The survey reveals that only:

• 47.5% have board level directors, or compliance committees responsible for anti-corruption

• 38.2% have anti-corruption risk assessment procedures when entering new markets

• 64% include a standard "no bribe" clause in sub-contractor contracts

• 58% conducted integrity due diligence on potential new business partners

• 16.2% feel that facilitation payments are essential to keep business going (1.3% in the UK), but this figure rises to 27.5% in India, 25.5% in Mexico and 24.6% in China

• 66% ban 'facilitation payments' to speed up government transactions - such as customs clearances

• 37.8% of companies would report a corrupt competitor to the police or regulatory authorities.

In addition:

• 67.6% do not believe that they will have to conduct an anti-corruption investigation next year, in spite of the fact that 56.6% conducted one in 2013

• and 44.7% of respondents see no need for further investment in compliance

Commenting on the survey's findings, Richard Fenning, CEO of Control Risks said: "Governments across the world are demanding more of companies in the fight against corruption. This is true even in markets where regulation and law enforcement capabilities are often under-resourced. Companies need to understand this change and take it seriously. Many companies do now have the compliance processes in place, but this is only half the battle. Companies are getting better at talking the talk. They need to walk the walk, and introduce the real changes in culture and process that will protect them. Without this, there is a real risk of companies sleep-walking into a major crisis."

The International business attitudes to corruption report can be found on the Control Risks website.