Leas Bachatene, CEO, ethiXbase
“Sparked by the COVID-19 pandemic, the recent economic downturn witnessed around the world has acted as fertile ground for bribery, corruption, and fraud. The pandemic has highlighted how important it is to identify, understand and resolve anti-bribery and corruption risks and acted as a global wake-up call for governments and businesses alike to take a stand for integrity.
Incidents of bribery and corruption can seriously damage a business’s reputation, culture, regulatory standing and often profitability. For example, in 2014 the French industrial group, Alstom agreed to pay a record $772.3m fine for bribing officials to win power and transportation projects from state-owned entities around the world. Reputation damage typically arises from negative PR and media coverage when a company appears, or even honestly believes, to have proper anti-corruption measures in place and then gets caught in a corruption scandal it is ill-equipped to deal with.
Outside the business world, these incidents can have tragic and far-reaching consequences for individual victims and society at large. According to Transparency International, corruption in the health sector kills an estimated 140,000 children a year. In the UK alone, £1.27 billion is lost annually to fraud, bribery and corruption in the NHS. Financial misconduct often impacts the poorest in societies. For example, in Paraguay, the poorest households are forced to pay nearly 13% of their income in bribes – twice as much as the richest households. In addition, corruption undermines environmental protections, threatening the future of our societies as well as the entire planet.
“History has taught us that difficult economic times increase the likelihood of misconduct and as the world now begins to recover from the COVID-19 pandemic, instances of financial wrongdoing carried out behind closed doors since March 2020 will begin to surface. There are several hidden pitfalls that can act as obstacles for organisations seeking to initiate a strong anti-bribery and corruption programme. For a successful post-pandemic recovery, a reassessment of bribery and corruption risks, whilst maintaining operational flexibility, will be crucial in the coming months.
“To be able to identify and mitigate the issues that are yet to come to light, safeguard their reputation and remain in compliance with regulatory requirements, every organisation needs to have an effective risk management system in place. However, many organisations feel that anti-bribery and corruption laws do not apply to them. This stems from a lack of understanding of the full scope of legislation now widely being enacted and the view that additional compliance restraints are roadblocks to conducting business.
“Top-level management must be fully invested in the effectiveness of an anti-bribery and corruption programme. In fact, the importance of top-level investment in anti-corruption programmes is highlighted in the guidance under the UK Bribery Act, which is created to directly address difficulties with executive commitment. Without clearly communicated commitment from the C-suite, the eagerness for the rest of the organisation to dedicate itself to anti-bribery protocols and processes is threatened.
“Finding the balance for the right level of anti-bribery and anti-corruption efforts is an ongoing challenge for many organisations and the result is seen in budget allocations that have been hindered by indecisiveness. A cost-efficient compliance programme is achievable with the right solutions and integrated prevention in place.
“A common pitfall in the effectiveness of monitoring risk management is the insufficiency of corporate compliance resources. Many corporate compliant departments are leanly staffed and often hold responsibility for several areas of risk management, including anti-corruption and anti-bribery. By facilitating easier exchanges of anti-bribery and corruption resources between all function groups within an organisation can go a long way to help maximise limited resources.
“Managing the volume of information that can be generated by following anti-bribery and corruption protocols can be challenging. An effective compliance programme starts with protocols that are responsive enough to respond to varying levels of risk without interrupting business operations. This can be achieved through clearly defined escalation paths that help your organisation quickly process large amounts of information into actionable intelligence.
“There are two battles in the fight against financial misconduct; identifying potential bribery and corruption risk within your customer and third-party vendor base and deciding the actions to undertake based on screening outcomes. Decisions between key tenets including executive buy-in, frequent communication and training, information transparency and clearly defined protocols and expectation, is where compliance programmes truly come together.
“The unprecedented and formidable nature of due diligence requirements ensures that there is no single solution for every case. It is crucial for every organisation to apprehend the challenges in their full scope and determine solutions that are relevant and proportionate to their own risk exposure and business needs.
“If we are to truly make a difference in the movement against bribery and corruption, we must unpick the increasing complexity and geographical diversity of modern supply chains which can so easily hide corrupt practices. This means identifying gaps in intelligence that threaten the integrity of supply chains and acting on that information in ways that support controlling or reducing costs while ensuring a competitive delivery profile. Detailed reviews of third parties, new and existing clients will identify any corruption or bribery issues and ultimately safeguard an organisation’s reputation. The ongoing crisis has only been exacerbated by the pandemic and we must help businesses build ethical supply chains that benefit people and the planet.”
Many companies are vocal about being sustainable in their business values and actions but are often unable to measure or demonstrate their progress, achievements, and impact. ethiXbase has an ambitious strategy to solve this problem and help organisations meet the principles set by the UN Global Compact which focus on human rights, fair labour conditions, anti-corruption, and environmental sustainability.
Working with corporates and their third parties, ethiXbase provides technology that simplifies compliance and risk management within supply chains, facilitates communication, and encourages businesses to educate and train their suppliers to elevate their own practices and standards.