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Greg Esslinger: Political risk analysis can save your compliance program

Since 2001, Control Risks has analyzed international corruption and compliance, through discussions with clients and surveys. The results show that although honest companies are still losing business to corrupt competitors, they are doing so at a slower rate than over a decade ago.

Tough anti-corruption laws are increasingly working, corporations are improving at integrating corruption risk into strategic planning, and more robust compliance policies are becoming a competitive advantage.

Our research has also shown that business leaders who study the political environment before entering a new market maximize their chance of success, whether their goal is expansion, transaction, or joint venture.

The same approach can help their compliance program succeed as well.

Over the past decade or so, of those corporations Control Risks has surveyed companies from countries with the highest levels of international enforcement show a greater willingness than before to take risks. Armed with the experience of how to effectively bake anti-corruption practices into business as usual, firms under the most scrutiny are boldly seeking opportunities in regions that they formerly might have blacklisted.

According to Richard Fenning, CEO of Control Risks, some regulatory compliance regimes are instituted “legitimately to make doing business in these countries easier…but there’s also a lot of highly politicized anti-corruption initiatives going on in the world that are really used to drag power to one particular political faction or the other.”

As regulatory and enforcement environments vary in maturity from the burgeoning (e.g. Colombia and India) to the well-developed (e.g. the U.S., UK, and Germany), corporate compliance programs should scrutinize each unique environment. The ability to execute compliance procedures takes on different forms in different places, and the consequences of getting it wrong are increasingly more costly than fielding a regionally flexible, well-trained compliance team.

Poorly formulated compliance procedures can result from headquarters failing to take local realities into consideration when demanding adherence to relevant laws and ethical standards — which can then lead to a drain on resources.

Investing in a nuanced understanding of political regimes’ shifting objectives, coupled with open communication with frontline staff, is critical. Doing so at the beginning of any international business venture increases its chance of success.


Greg Esslinger is a Senior Managing Director and heads the Compliance, Forensics and Intelligence practice for the Americas at Control Risks. He can be reached at [email protected].

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