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Corruption risk deters investors

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Corruption risk deters investors

Fifty five percent of South African companies surveyed by Control Risks for its annual “International attitudes to corruption” survey state that they avoid certain countries if the corruption risk is perceived to be too high.
The survey also found that corruption risk is a major cost to honest companies, with 61% of South African companies having already pulled out of a deal at least once due to the risk of corruption, despite already investing time and money. This is much higher than the global average (41%). This risk-averse approach is underlined by other strong prevention measures: 54% of South African companies have procedures in place for corruption risk assessment (global average is only 39%) and 57% have a standard procedure for integrity due diligence on business partners.
The greatest risk is still seen in transactions associated with routine governmental transactions. A massive 46% perceived this as very high and 42% as high.
South African businesses are in favour of strong anti-corruption laws with 85% of respondents of the opinion that the laws improve the business environment for everyone. Although many challenges remain, this is higher than the global average of 81% which is a positive indicator of changing attitudes to corruption.
Although compliance programmes are crucial and the general trend is positive, reliance on a legalistic approach to compliance can be dangerous. Most (51%) global respondents have conducted no internal corruption investigations in the past two years, highlighting the danger of waiting passively for a whistle to be blown, and perhaps suggests a culture of complacency in some organisations.
George Nicholls, senior MD of Control Risks Southern Africa, comments: “Too many businesses are losing out on good opportunities to corrupt competitors, or choosing not to take a risk on an investment, or entering a new market in the first place for fear of encountering corrupt practices.” Says George Nicholls, senior MD at Control Risks Southern Africa. “Companies need to find a balance and spot the points of light in countries that may otherwise appear as no-go areas. Individual regions and businesses within them vary enormously and careful evaluation should be undertaken.
“The other concern raised is an overreliance on compliance,” he says. “Often when organisations have comprehensive compliance processes in place, business leaders treat them as a safety net and don’t undertake independent reviews ruthlessly enough, or reward good behaviour and incentivise teams to prioritise ethical behaviour over financial performance.”