March 10, 2008 - The majority of surveyed companies lack confidence in their anti-corruption programs; PwC report provides guidance for effective risk mitigation.
Nearly two-thirds of senior executives around the world say they have experienced some form of actual or attempted corruption in their business dealings, according to a report by PricewaterhouseCoopers. The report, Confronting Corruption: The business case for an effective anti-corruption programme, finds that almost 80% of executives say they have anti-corruption programs in place at their company, but only 22% are confident the programs are effective. Executives say they feel vulnerable to corruption particularly when doing business in expanding markets such as China, India, Russia and South America.
PricewaterhouseCoopers commissioned the Economist Intelligence Unit to conduct a global survey and in-depth interviews with senior executives and anti-corruption specialists. Survey respondents, comprised of 390 senior executives from 70 countries, indicate significant operational impacts of corruption:
- 63% said they had experienced some form of actual or attempted corruption;
- 45% said they had not entered a specific market or pursued a particular opportunity because of corruption risks;
- 39% said their companies had lost bids because of corrupt officials;
- 42% said their competitors paid bribes.
The situation in the Czech Republic is not different, as was showed by another PricewaterhouseCoopers study, the Global Economic Crime Survey, published last October. According to that survey, 47% of Czech companies believe they lost an opportunity because their competitor paid a bribe. 30% of companies in the Czech Republic reported having been asked to pay a bribe, while 27% of companies admitted to corruption and bribery taking place.
“Companies have an urgent business case to support the development and implementation of a formal and strategic anti-corruption program,” said David Jansen, partner, PricewaterhouseCoopers LLP. “In recent years, companies caught breaking anti-corruption laws have individually paid hundreds of millions of dollars in fines and several CEOs have stepped down in disgrace."
55% of respondents to our survey say the most severe impact of corruption would be to their corporate reputation, which is a greater percentage than the combined total of those who say legal, financial and regulatory impacts would be the most significant.
PwC report points out the need for communications around an anti-corruption program, ensuring that employees know about the program and understand that there will be sanctions if they transgress. The most effective ways to minimise risk of corruption in a company are commitment from senior management (70%) and communication of clear guidelines (49%).
Sirshar Qureshi, partner at Forensic services of PricewaterhouseCoopers Czech Republic stated:
”Corruption has been a hot topic in the Czech Republic for a number of years; with Czech companies struggling to set up controls on how to combat this real risk. However we have seen evidence recently that companies recognize this as an issue and are starting to take steps to tighten controls – though experience tells us this will only work if senior management is truly committed to do the right thing.”
On the formal side, the survey indicates that many companies' underlying policies and controls do little to identify and mitigate risk due to poor design or implementation:
- Slightly less than half say their program is clearly communicated and enforced;
- Rigorous risk assessment, a crucial step in program design, is overlooked by more than half of those surveyed, and only 25% perform proactive risk assessments or monitoring;
- Only 40% of respondents believe their current controls are effective at identifying high-risk business partners or suspect disbursements.
It is not, however, all bad news. Drawing from interviews with experts and real life case studies from global companies, the report provides practical guidance for operating in challenging environments. Leveraging efforts by leading non-governmental organizations focused on the issue, the report also includes a model for an effective anti-corruption program that can be tailored to any environment.
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Notes to the editor:
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- Confronting corruption: The business case for an effective anti-corruption programme is a PricewaterhouseCoopers report that examines what companies are currently doing to manage the risk of corruption and what steps they should take to better protect themselves in the future. It is based on a global online survey, conducted in November 2007 by the Economist Intelligence Unit, of 390 senior executives (of whom more than half were board-level or C-suite executives) from 70 countries. To supplement the quantitative findings, in-depth interviews were conducted with 36 senior executives and anti-corruption specialists from 14 countries.
- The Economist Intelligence Unit is the business information arm of The Economist Group, publisher of The Economist. Through our global network of more than 650 analysts and contributors, we continuously assess and forecast political, economic and business conditions in 200 countries. As the world's leading provider of country intelligence, we help executives make better business decisions by providing timely, reliable and impartial analysis on worldwide market trends and business strategies.
- Confronting corruption: The business case for an effective anti-corruption programme is available free of charge at www.pwc.com/anti-corruption.
- PricewaterhouseCoopers Investigations & Forensic Services practice operates across over 50 countries and can deploy experienced and knowledgeable teams to manage and mitigate the threat of corporate crimes and achieve the best possible outcomes. Using in-depth forensic accounting and corporate investigation skills allows clients to continue their business, recover lost funds, and halt further economic losses.The expertise to assist organisations investigate and manage the many risks associated with fraud, abuse and dishonesty comes from the experience of the international staff and their backgrounds in forensic accountancy, forensic IT and private sector investigations as well as regulatory work and law enforcement.
- PricewaterhouseCoopers (www.pwc.com) provides industry-focused assurance, tax and advisory services to build public trust and enhance value for its clients and their stakeholders. More than 146,000 people in 150 countries across our network share their thinking, experience and solutions to develop fresh perspectives and practical advice.
“PricewaterhouseCoopers” refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity.
- Please find the other PwC press releases, publications, surveys and expert articles in Press centre.
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