3 valuable lessons shared in the Corruption Perceptions Index

08 May 2020 22:36

Aerial perspective of team reviewing plans

For nearly a quarter of a century, Transparency International’s Corruption Perceptions Index has highlighted the state of corruption worldwide by analyzing perceived levels of public sector corruption. When Transparency International published its Corruption Perceptions Index for 2019, it revealed a distressing picture of corruption worldwide. Take a closer look at the findings and what risk management professionals can learn from them.

Corruption remains a global problem

2019 saw the world witness a significant number of anti-corruption movements across the globe. Millions of people united—in Iraq, Lebanon, Chile, Nicaragua, Algeria and other countries—to speak out against corrupt practices in politics and the economy, demanding a more active role in the social, political, and economic decision-making process. Such protests reflect a growing distrust in government and elected officials, undermining political integrity in the affected countries.

This year, compliance professionals and business officials that contribute their expertise to the index found little to no real improvement, despite the mushrooming of anti-corruption movements. This can also be seen in the again unchanged average global score of 43, and the fact that more than two-thirds of countries and territories scored below 50 again on the index ranging from 0 (highly corrupt) to 100 (very clean).

A few countries—Greece, Guyana and Estonia—showed positive momentum, but others saw their scores deteriorate, among them Canada, Nicaragua, and Australia. Following suit with previous rankings, Denmark, New Zealand, Finland and Singapore led the index as the top performing countries. Syria, South Sudan, and Somalia where among those scoring least. The most recent CPI focused on the relationship between politics, money, and corruption. Clearly not all that glitters is gold.

Anti-bribery & corruption compliance failure highlights risk

While the index attests the top scoring countries to have the least corrupt public sectors in the world, private sector corruption and issues such as money laundering still affect them.

Recent high-profile fines and prosecutions underline the argument that even countries at the top of the CPI ranking must step up enforcement of anti-corruption and bribery legislation. Cases of transnational corruption and bribery have highlighted the questionable role multinational companies seem to play in political and economic spheres in less developed nations.

Case in point: Airbus Settlement

On January 31, 2020, Airbus agreed to the largest Deferred Prosecution Agreement (DPA) to date. The airplane manufacturer will pay €3.6bn ($4bn) to regulators in three countries: Britain’s Serious Fraud Office (SFO), France’s Parquet National Financier, and the U.S. Department of Justice. The cross-border investigation began after the European aviation pioneer self-reported suspected compliance failures to regulators in 2016. Reporting on the DPA, the Economist noted, “The size of the fine, which dwarfs other bribery-related settlements in recent years, reflects serious, wide-ranging allegations concerning Airbus’s use of external consultants to bribe customers to buy its civilian and military aircraft in a number of markets. The company will hand over €500m more than it made in consolidated net income in 2018.”

How companies can lead the way to a less corrupt world

In addition to the publication of their annual findings, Transparency International also urges governments and public officials to make the fight against corruption a number one principle. But the private sector has an important role to play—a fact that was emphasized during this year’s World Economic Forum which saw considerable focus on the need for companies to embrace Environmental, Social and Governance (ESG) commitments.

Companies need to implement strong, resilient risk management programmes to tackle increased risk exposure from third parties—like the middlemen that led to the Airbus case—to mitigate the risk of fines, protect their reputations and meet the ethical expectations of investors, employees, and consumers.

Due diligence and ongoing risk monitoring play pivotal roles in protecting organisations against third-party risk—not just for those in industries and geographic regions with a high public perception of corruption, but for any company with extended customer networks and global supply chains. Every act of compliance takes the world one step closer to a corruption-free world.

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