December 9, 2013, by ICCSR
Corruption and Bribery – is risk management the answer?
The enforcement of the US Foreign Corrupt Practices Act against Siemens and BAE shows that a failure to address bribery can exact a very high cost on companies ($800 million and $400 million respectively), leaving aside damaged reputations among investors, employees, customers and business partners. Due to the recession in Western markets companies have been seeking opportunities for growth in emerging markets – where they are likely to encounter corruption and bribery, according to the World Bank and corruption watchdog Transparency International, two organisations who measure corruption levels worldwide. Meanwhile, enforcement of anti-corruption legislation has strengthened in the past decade in the US and Europe, as well as in countries such as China, where Western drug companies, including GlaxoSmithKline, faced investigations over allegations of corruption this summer.
Anti-corruption legislation in the UK was given a boost with the introduction of the UK Bribery Act in 2010. Under the Act, the Serious Fraud Office (SFO) can prosecute companies and individuals for bribery, regardless of where this takes place, as long as the company or individual has a link with the UK. Furthermore, the Act is the first anti-corruption legislation in the world to criminalise the failure of companies to prevent bribery through not having ‘adequate procedures’ in place. No corporate cases have been prosecuted so far under the Act, although the new Director of the SFO, David Green, has said prosecutions will be actively sought out .
The introduction of the Act led many companies to review their anti-corruption policies and compliance systems. The uncertainty surrounding the Act in 2010 also provided ample consultancy opportunities for compliance experts to advise companies on updating their anti-corruption programmes. In a recent ICCSR working paper  I compare the arguments used by consultants of the Big Four consultancy firms in convincing companies of the need for enhanced anti-corruption programmes, with the language used in the anti-corruption programmes of 50 large UK companies.
The findings reported in the paper show that the consultants draw on arguments related to risk management, using terms such as “ABC (anti-bribery and corruption) risk”, “proportionality”, and proposing continuous monitoring as a solution, including the use of sophisticated data tracking technology. Much less frequently do they talk about anti-corruption in ethical terms such as “integrity” or “doing the right thing”. Companies themselves also increasingly treat anti-corruption as a risk management issue: in less than a quarter of the examined companies the responsibility for anti-corruption policies was allocated to the Ethics Committee of the board, whilst in 50% of the cases it was assigned to the Audit Committee, evidencing the corporate emphasis on compliance and audit trails. But whilst a risk discourse seems to have perpetrated corporate anti-corruption reporting, extensive details of the actual risk management activities undertaken remain very sparse.
What does this mean for corporate anti-corruption practices? The debate on anti-corruption is increasingly classed in terms of risk and risk management. In this logic, the source of problem of corruption is conceptualised as lying external to the company in high risk business environments. Yet, because ignorance is no longer a defence, continuous monitoring of global business operations is needed. This places responsibility on an ‘all-knowing’ corporation which is constantly screening environments, categorising business opportunities and surveying employees and business partners alike.
It also raises questions about the future of the ‘war on corruption’. Risks can only be mitigated, never eliminated – does the same go for corruption? If the SFO fails to prosecute a big case under the UK Bribery Act, will that affect the willingness of companies to invest in anti-corruption programmes? On the other hand, does the discourse on corruption risk provide the issue with increased attention from senior management and perhaps concurrent allocation of responsibilities, which ethics programmes might have been lacking? Regardless of the corporate department in charge, it is clear from current developments that companies can no longer afford to stay silent on the issues of corruption and bribery.
 Financial Times, 24 October 2013, Caroline Bingham: SFO changes approach with aggressive scrutiny of key sectors.
By Dr Rieneke Slager
Lecturer in Strategy and Sustainability, Nottingham University Business School.
Photo by Erlend Aasland, reproduced under creative commons license CC BY-NC-SA 2.0. Source: http://www.flickr.com/photos/23753610@N08/4107345124