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Companies Most Fear Reputational Risk When Hiring Outside Partners

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Companies Most Fear Reputational Risk When Hiring Outside Partners


By: Aarti Maharaj

55% of respondents report legal, ethical or compliance issues with third parties.

Kroll and Ethisphere recently released its 2017 Anti-bribery & Corruption Benchmarking Report (ABC) at the 9th Annual Global Ethics Summit last week. The report, titled “Regulatory Enforcement: The Rise of Reputational Risk,” takes a closer look at trends and the broader developments in the field of ethics and compliance.

Given the changing nature of business activities coupled with a new regulatory framework, a staggering 57 percent of companies admitted that they have no expectation to see an improvement in their organizations’ risks in 2017.

The good news, however, according to the data collected— anti-bribery and corruption efforts are becoming increasingly integrated with overall company strategy and business trends. There is a clear growth in awareness and involvement regarding anti-corruption programs from boards of directors and also executive teams. Finance teams, in particular, are emerging as an invaluable partner for the compliance officer and a strong line of defense against bribery and corruption risks.

“It is clear to us that the anti-bribery and corruption program can be viewed not only in the context of regulation, but also more broadly as a means of protecting what is perhaps an organization’s most valuable asset – its reputation,” said Steven Bock (pictured right) Managing Director and Head of Operations and Research with Kroll’s Compliance practice.

In addition to the information garnered from the survey, the report also combined data analysis from Ethisphere’s World’s Most Ethical Companies®.

“All research points toward a clear link between ethics and performance and with more involvement from leadership, we are seeing that these efforts are being prioritized,” added Erica Salmon Byrne, EVP & Executive Director of Business Ethics Leadership Alliance, Ethisphere. “Smart companies with strong compliance programs will take note and adjust their priorities accordingly in order to mitigate unnecessary risk and protect their company’s valuable reputation for integrity.”

Other findings in the ABC Report include:

  • Respondents believe that the top risks to their anti-bribery and corruption programs will come from third party violations (40 percent), a complex global regulatory environment (14 percent), and employees making improper payments (12 percent).
  • Among the leading companies recognized as World’s Most Ethical Companies Honorees, 14 percent more are including anti-bribery and corruption in director onboarding and periodic training this year as compared to 2016. Similarly, there was a 20 percent increase in the number of Honorees that now cover anti-bribery and corruption concerns during their ethics and compliance program updates with the board.
  • Anti-bribery and corruption risks are not improving: Not only do a majority (57 percent) of survey respondents expect no improvement in their organization’s risks in 2017, but 35 percent expect increased risk; while only eight percent expect decreased risk this year.
  • More than half (55 percent) of the respondents report that they identified legal, ethical, or compliance
issues with a third party after due diligence had been conducted, highlighting the importance of ongoing monitoring. Notably, it was often the case that these issues or risks did not exist at the time of onboarding, as reported by 40 percent of respondents who experienced a post-due diligence issue.

“As compliance professionals, our respondents know the importance of monitoring when working with third parties, but this report highlights the need for an ‘interval monitoring’ approach to ongoing diligence, where the scope and frequency of monitoring efforts are determined based on risk,” Bock added.

More on this topic

Ethicast: The Current State of Anti-bribery and Corruption: Ethisphere chatted with Joe Spinelli, Senior Managing Director, Kroll, about Anti-Bribery and Corruption enforcement in 2017 and beyond. Click here for more.

By | 2017-03-20T15:48:48+00:00 March 20th, 2017|Ethics & Compliance Programs|


Aarti Maharaj
Aarti Maharaj is Executive Editor and Director of Communications at Ethisphere. Maharaj covers ethics, compliance, risk, and corporate governance. She can be reached at aarti.maharaj@ethisphere.com