Bribery and corruption risk is increasingly making its way to
the top of the C-Suite agenda. The issue has received considerable
media attention for some time due to the introduction of tougher
bribery and corruption laws, such as the UK Bribery Act and in
countries like Brazil1, and the high level of regulatory
enforcement by the US Department of Justice and Securities and
Exchange Commission. More recently, the results of the Transparency
International's 2013 corruption perception index reflected a
perception that the risks of bribery and corruption in Australia
What are the risks?
To understand the risks an organisation needs to consider the
likelihood and consequences of a bribery and corruption issue.
The likelihood that an organisation will experience a
'bribery and corruption issue' will depend on:
The probability that the company will be asked to pay a bribe.
This could be influenced by:
Their location (e.g. a high risk territory according to
Transparency International's Corruption Perception Index)
What industry they are in (e.g. high risk industries include
mining, energy, manufacturing and engineering and the financial
Do they use third parties? What are the third party's
policies on bribery and corruption?
What is the size and complexity of the organisation?
What laws are they bound by? What do those laws say about
bribery and corruption?
How would employees/third parties representing the organisation
respond to requests for a bribe? This depends on:
Do the employees/third parties know how the organisation
expects them to respond to such a request?
Do they understand the organisation's tolerance to bribes
and potential consequences?
Does the organisation have an effective anti-bribery and
The consequences for an organisation experiencing a bribery and
corruption issue can be dramatic. Obviously it will depend on the
type of event, but consequences may include:
a long running and expensive investigation that soaks up
management time and impact staff morale;
regulatory action resulting in severe penalties such as fines,
disgorgement of profits and even prison;
adverse impacts to reputation;
ongoing compliance issues;
limiting future ability to deal with third parties (e.g. being
a contractor, service provider, supplier or entering a joint
creating perceived risk issues for any future purchaser of the
company or asset.
How does an organisation manage the risk of bribery and
In the business community there is an expectation that
organisations have an effective anti-bribery and corruption
compliance program. However, how do companies meet the standard
required? There is no "one size fits all" - organisations
face different bribery and corruption risks and each company will
require a different approach to risk management. As a guide, the UK
Bribery Act talks about implementing 'Proportionate
Procedures'. To understand what is 'proportionate' an
organisation needs to understand the risks and this can be achieved
by performing a risk assessment.
As more and more Australian companies venture overseas into high
risk areas, it is important they be proactive in dealing with the
risk of bribery and corruption - implement a bribery and corruption
framework, train employees and conduct due diligence on third
This article was originally published on Corporate Risk and
Juan Carlos Varela,
Geida D. Sanlate and
Daniela Sedes, 'Brazil's New Anti-Corruption Law: What
Every Multinational Employer Should Know', Littler
Mendelson. 2See Athena Yenko, International Business Times,
Australia, 'Australia 'Big Decliners' in
International's Corruption Perception Index of 2013' 3
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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