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Bribery and corruption survey 2012

Frank O'Toole, Deloitte Forensic PartnerHistorically, bribery and corruption has not been high on the risk agenda for Australian and New Zealand organisations. Other risks have seemed both more important and more immediate.

For some organisations, entering the murky world of paying bribes in relation to offshore operations has been seen as a necessary cultural evil, and the price of doing business in offshore locations where corrupt behaviour is considered the ‘norm’.

However, the landscape is changing. Expectations are higher and stakeholders are increasingly demanding a commitment to ethical business dealings across the operational spectrum.

So what has changed?

A number of things, including:

  • As Australian and New Zealand organisations increasingly look overseas for new business and growth opportunities, their exposure to corruption risk and non-compliance with applicable foreign anti-bribery legislation increases
  • The enactment of the United Kingdom’s Bribery Act (UKBA) in July 2011, and the growing impact internationally of the long enforced United States’ Foreign Corrupt Practices Act’s (FCPA)
  • Increasing enforcement by the Australian Federal Police (AFP) and New Zealand’s Serious Fraud Office (SFO), means the activities of wayward individuals and organisations are increasingly under the microscope.

Ignorance and inactivity are also no longer a defence. Consequently, awareness of the risks, and how to manage them, has become more important than ever before.

Our survey

The results of this inaugural Deloitte Bribery and Corruption Survey confirms our experiences that Australian and New Zealand organisations are encountering bribery and corruption incidents and challenges which many are ill-equipped to identify, manage and, most importantly, prevent.

With this report, we not only provide a summary of our survey results, but also present the views of regulatory bodies, the international body fighting corruption, Transparency International (TI), and industry experts.

Exposure – who’s at risk?

  • 34% of organisations have operations in high risk Jurisdictions1
  • Of these organisations:
    • 21% have experienced a bribery and corruption incident in the last five years, and 61% of these occurred in the last 12 months
    • 79% have not experienced a known instance of bribery and corruption in the last five years, but 48% of these have never conducted a corruption risk assessment
    • 21% do not discuss corruption risk at management or board level
  • 46% of organisations that have experienced a foreign bribery and corruption incident are parties to joint ventures with offshore operations
  • The top three industries to have experienced known instances of bribery and corruption in offshore operations are:
    • Energy and resources
    • Manufacturing and engineering
    • Financial services
  • These industries account for 60% of known instances.

How much do organisations really know about what is happening in their offshore operations? How many realise the high risk corruption presents? How many are reliant on their JV partners to do the right thing?

Enforcement – what about the law?

  • Only 25% of organisations with offshore operations have a ‘comprehensive’ understanding of relevant legislation
  • Of the executive/board members who responded, 50% represent organisations with offshore operations, and of these:
    • 20% said they have a ‘comprehensive’ understanding of the applicable domestic (Australian or New Zealand) legislation
    • 41% with operations in the US said they have a ‘comprehensive’ understanding of the FCPA
    • 40% with operations in the UK said they have a ‘comprehensive’ understanding of the UKBA
  • Of organisations with offshore operations, 40% said they are not concerned with risks arising from non-compliance with applicable legislation, yet 67% of these respondents have never conducted a bribery and corruption risk assessment.

Managing bribery and corruption risk needs to take into account the various legislative exposures, particularly those in Australia, New Zealand, the US, and the UK. While an ethical culture mitigates the risk of a legislation breach, knowledge of the law is essential.

Accountability – who knows what to expect?

  • 48% of organisations with offshore operations do not have any formal policy or compliance program in place to manage corruption risk
  • 14% of organisations that have never undertaken a risk assessment have experienced a foreign bribery and corruption incident in the last five years
  • 80% of organisations with offshore operations either do not regard foreign bribery and corruption as one of the top five risks to their business in the next five years, or said the risk was not applicable to their organisation.

How can employees and third parties be accountable when an organisation’s position on corruption involving offshore operations is unclear?

To learn more about the survey please visit the 'Bribery and Corruption' website.

Author

Frank O'Toole
Partner | Forensic
+61 2 9322 7328


1 North Asia, South East Asia, West Asia, North Africa, East Africa, West Africa, South Africa, the Middle East, South America, the UK and US. The UK and US are included due to the application of the UKBA and FCPA outside of the UK and US respectively.

 

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