The cost of corruption, globally, is estimated at $2.6-trillion a year, of which the private sector contributes about $515-billion a year, Cliffe Dekker Hofmeyr (CDH) dispute resolution executive consultant Willem Janse van Rensburg said on Wednesday.
“It constitutes a massive illegal and fraudulent tax on [not just] the private sector, but the poorest of the poor,” he lamented.
While combatting corruption makes a lot of sense, to put the dire effects thereof into perspective, Janse van Rensburg told delegates attending CDH’s Corporate Investigations Seminar, on Wednesday, that data provided by Transparency International showed that an increase in corruption of just one point on a ten-point scale, lowered a country’s productivity, cutting 4% from its gross domestic product (GDP) growth.
On the other hand, a decrease in corruption of only one point on a ten-point scale, increases a country’s foreign direct investments by 19%.
As an example, Janse van Rensburg referred to South Africa’s State capture, which he said had wiped out about one-third of the country’s GDP. Further, as of May 14, the country’s unemployment rate was at 27.6% – a 15-year high, “thanks to corruption”.
Taking all of this into account, CDH dispute resolutions director Zaakir Mohamed encouraged organisations to implement and enforce an antibribery and corruption (Abac) compliance programme.
The implementation of such programmes was critical, if businesses were serious about protecting their assets and profitability, while maintaining their reputational image, he said.
Mohamed warned that by not implementing an Abac compliance programme, the financial and reputational risks that followed incidents of corrupt activity were severe.
Implementation of an effective compliance programme, however, will assist organisations in mitigating these risks and preventing or detecting corrupt activity so that irregular conduct can be remediated promptly and appropriately.
For an Abac compliance programme to be effective, Mohamed highlighted regulatory requirements, risk assessment, senior level commitment, due diligence, policy framework, whistleblower protection, as well as monitoring and review, as key focus areas.
“It is important for organisations to understand the legislative requirements of the various jurisdictions in which they operate, while also being consistent in their programme,” he told delegates attending the seminar.
It was also crucial for risk assessment to take place when developing an effective and meaningful Abac compliance programme, he added, noting that the results should guide an organisation on appropriate measures to implement so that they could mitigate the risk of corrupt activity.
Risk assessments must be conducted systematically and help to identify high-risk areas, while also enabling the business to identify policies and controls the organisation has in place to mitigate.
From here, Mohamed suggested that businesses first focus on managing the most serious of risks, such as those posed by the nature of the business or high-risk departments (like financial or accounting).
Senior level commitment, meanwhile, wass “paramount in driving an ethical culture organisation”, he said, adding that business should adopt a zero-tolerance approach to all incidents of corrupt activity and ensure communication throughout the organisation, for this to be effective.
Due diligence is another integral part of an Abac compliance programme. In following a risk-based approach, this focus area not only provides an organisation with greater insight to potential business transactions and partners, but assists it in mitigating procurement fraud, and identifying risks.
Numerous procedures can be implemented in this regard, including those of a basic background check, questionnaires, reviewing of documentation and information, as well as doing a financial analysis and interviews.
A policy framework, meanwhile, sets out a standard of conduct.
“Effective policies and procedures require an in-depth understanding of the organisation’s business model, products and services, use of agents and third-party intermediaries, as well as customers and government interactions,” Mohamed said.
This, he added, needed to be updated and reviewed often in order to remain relevant for the company.
In terms of whistleblower protection, Mohamed highlighted the need to have a procedure through which whistleblowers could remain protected and anonymous when reporting corrupt activity. This should also inform people on what to report, where and how to report incidents and why it is important to report corrupt activity.
Considering that risks and an operating environment changed continuously, Mohamed stressed the importance of companies constantly monitoring and reviewing their policies. This, he said, would ensure that an Abac compliance programme always remained effective.