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Execs See More Overseas Compliance Risk

AlixPartners recently surveyed large multinationals about their compliance programs. Our goal was to better understand the ways in which companies are identifying and addressing corruption risk.

Some key findings:

  • Two-thirds said that they have reassessed anti-corruption efforts due to Dodd-Frank and the U.K. Bribery Act.
  • Corruption risk is perceived to be a global problem and virtually every industry is susceptible.
  • Regions such as Southeast Asia, Africa, China, and Russia were perceived to have the highest levels of risk; Japan, Canada, the U.K., and Western Europe were perceived as having the least risk.

The survey was conducted during the fourth quarter of 2011. Respondents included general counsels and other executives who deal with their company’s compliance and legal issues. They came from multinational companies with annual revenue of $250 million or more, and 90% represented companies with revenues of $1 billion and above. Industries represented include technology, manufacturing, aerospace and business services, among others.

Higher perceived corruption risks spurred more training to employees, expanded internal audits, and more involvement by audit committees and boards in decision making about anti-corruption programs.

Nearly half the respondents said foreign subsidiaries are now receiving annual audits or employee training.

Employee training was perceived as the most effective way to reduce risk, with 90% of companies indicating they implemented such programs. Still, the survey found that companies are failing to monitor the effectiveness of these training programs.

Another concern: adequate staffing to handle compliance activities such as due diligence, a key area given the increased reliance on third parties overseas.

Companies are also struggling to keep up with their growth overseas. About 40% of the respondents said that having to customize policies on a country- by-country basis represented a hurdle, while at the same time, 60% said they are not scaling back in high-risk regions.

The complete survey results are here.

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Harvey Kelly is Global Head of Corporate Investigations at AlixPartners.

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