The ABC network recently ran a segment on the OECD’s concerns about Australia’s approach to bribery investigations entitled Australia ‘failing’ to tackle bribery by multinationals: OECD. Its examination of cases occurring prior to 2012 is relevant to the country’s current weaknesses in anti-corruption prevention and detection.
I found myself asking: If the relevant regulators and law enforcement bodies in Australia are failing to take action, then what is the deterrent for companies considering the payment of bribes in foreign jurisdictions?
Australia ranks well with respect to its level of bribery and corruption, sharing equal placement with Canada with a score of 81 (100 being the highest) in the 2013 Corruption Perceptions Index by Transparency International. The Index ranks countries and territories based on how corrupt their public sector is perceived to be by their general populations. I find this interesting given the corruption scandals involving state and local government in Australia in recent years, and suspect this ranking may change in 2014.
My main concern is that Australian companies may be lulled into a false sense of security and fail to take reasonable steps to avoid bribery and corruption in their business dealings.
It is my belief that most Australian businesses are generally under-prepared with respect to the risks of corruption and bribery. Although the larger firms have compliance teams and comprehensive anti-bribery frameworks, the smaller to mid-sized companies doing business overseas are most likely ill-equipped to deal with these issues.
With our high cost of labor and the relative strength of the Australian dollar, many Australian companies are opening up markets in new countries or have outsourced their operations to low cost countries in the APAC region. This raises a number of risks in terms of agents paying bribes to foreign government officials to win work, obtain working visas, or have business licenses issued.
In many instances, I doubt that their risk and compliance programs are sufficient to deal with the types of risks with which they are now faced.
As a minimum, all companies doing business outside of Australia should:
- Have a robust and comprehensive due diligence program that covers vendors, customers, and agents or any other persons representing their interests in that country.
- Undertake a risk assessment of their operations to determine which areas may be most vulnerable to corrupt practices.
- Implement a bribery and corruption awareness training program, not only for foreign-based staff but for their domestic management and staff as well.
- Ensure their audit program targets high-risk areas to look for signs of corruption, such as unexplained payments, inflated invoices or unusual vendors.
Doing business overseas represents the future for many Australian businesses, but it also poses a new range of risks in relation to bribery and corruption. Company leaders should make sure they understand all the risks they face in this regard before venturing offshore in search of cheap labor or new markets for their products.
Guy Underwood is the executive chairman and founder of the RISQ Group, one of APAC’s leading providers of risk management and employment screening services. He can be reached here.