More complex Anti-bribery and corruption risks
Companies find complying with anti-corruption regulations more challenging than ever, according to KPMG’s latest Anti-Bribery and Corruption Report 2015

Companies are finding it harder to deal with Anti-Bribery and Corruption (ABC) issues, according to KPMG's latest ABC report, Anti-bribery and corruption: Rising to the challenge in the age of globalisation. Two trends are driving these changes. First, governments around the world are tightening existing ABC regulations and introducing new ones. Second, in a globalising economy, companies rely more than ever on third parties in far-flung parts of the world, often where there is high corruption risk.

Despite great efforts to build ABC programmes, it is clear there remain gaping holes in them. The problem is particularly acute in the management of third parties, who are outside the organisation’s direct control, making their conduct harder to manage and track. Respondents to the survey admitted third parties are their biggest challenge in the field of ABC, but acknowledged they could do more to develop a culture of compliance among their employees, vendors and business associates.

International companies operating in ASEAN have consistently cited corruption as the most significant challenge to doing business in this region1. They cite the failings in the fair and efficient enforcement of the law and pressure to bribe officials and/or customers for approvals and contracts as the greatest risks to their long-term business operations in ASEAN.

The worldwide survey was conducted by KPMG with Singapore Management University to assess the relative strengths and weaknesses of companies’ ABC programmes. 659 companies took part, including 72 from Asia Pacific.

The main findings of the survey include:

  • Half of respondents from the Asia Pacific region say they are “highly” or “moderately challenged” by ABC issues, with a similar proportion among them finding developing effective mechanisms for training and communicating ABC issues challenging.

  • With companies further globalising their operations, third party management poses the greatest challenge for their ABC programmes, with auditing third parties for compliance the biggest single concern and conducting due diligence on third parties being the third biggest.

  • Despite the difficulty of monitoring dealings with third parties, nearly half of respondents do not identify third parties that are high-risk. Among the respondents from the Asia Pacific region, only 40 percent had a formal process for identifying high ABC risk third-parties. More than half of respondents with right-to-audit clauses over third parties have never exercised these rights.

  • While expansion through mergers and acquisitions is a key part of the growth strategy of two-thirds of respondents, many global companies are unaware of the potential financial and regulatory consequences of failing to identify corruption risks during acquisitions. Among Asia Pacific respondents, 65 percent are unaware of “successor liability” issues arising from the Foreign Corrupt Practices Act and only 34 percent among them include ABC considerations in their pre-acquisition due diligence process.

  • Respondents complain their organisations do not provide them with the resources to manage corruption risk, fourth among the top challenges facing all survey respondents.

  • Data analytics is an important and cost-effective tool to identify bribery and assess ABC controls. Yet only a quarter of Asia Pacific respondents use data analysis to identify violations and only one-tenth of those who do so monitor data on an ongoing basis.
Despite efforts to improve ABC policies and controls, companies continue to fall foul of tough regulations. As a result, they are fined heavily, their reputation is damaged and increasingly individual executives are targeted by regulators and prosecutors to account for their organisations’ misdeeds.

Much has been said about ‘tone at the top’, yet failings at middle and lower management level continue. This has led to the conclusion that not enough is done to ensure the message from senior management results in ‘tone at the middle’. Companies will continue to fall short if they treat management leadership as talk rather than action and involvement.

1 ASEAN Business Outlook Survey 2016, American Chamber of Singapore and U.S. Chamber of Commerce
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