Bribery and corruption a real and growing issue for New Zealand organisations

Deloitte survey shows worrying level of bribery and corruption

Domestic bribery and corruption is both a real and growing issue in New Zealand that organisations ignore at their peril, according to a Trans-Tasman survey released to business audiences in Wellington and Auckland today.

The 2015 Deloitte Bribery and Corruption Survey canvassed the views of 269 public and private sector organisations across New Zealand and Australia and found that an alarming 23% of respondents reported experiencing one or more known instances of domestic corruption in the last five years. Of these more than half occurred in the last twelve months.

Deloitte Lead Forensics Partner Barry Jordan says that in the second survey of its type conducted by Deloitte (the first was completed in 2012), it is the first that asked questions about domestic bribery and corruption.

“Almost one in four organisations reporting an incident is a significant level of corruption. There is no longer any excuse for complacency against this risk,” says Mr Jordan.

“Apart from the legal ramifications, which can include heavy fines or even jail time, the long term reputational damage from corruption can have serious long term flow on effects on an organisation’s bottom line.”

The most common types of domestic corruption cited by respondents included undisclosed conflicts of interest, supplier kickbacks and personal favours. More than a quarter (26%) of the reported incidents were from organisations with more than 5000 employees. And 68% of incidents involved only private/business individuals. No industry was immune with all sectors experiencing at least some reported incidents in the last five years.

The top ways in which instances of domestic corruption were discovered were through management review, internal controls and tip-offs from employees. However interestingly for larger organisations with more than 5000 employees the top discovery method was from tip-offs via a dedicated hotline.

“This highlights the importance large organisations should place on enabling tip-offs to be made, appropriately received and then actioned. Hotline channels have increasing potential in terms of incident detection and deterrence,” says Mr Jordan.

As with the 2012 survey, this year’s survey also looked at bribery and corruption for organisations with offshore operations. It found that 40% of survey respondents have operations in high risk jurisdictions, compared to 34% in 2012. And 34% of these reported experiencing an offshore bribery and corruption incident in the last five years, up from 21% in 2012.

These organisations face the dual risk of operating in countries with higher corruption risk and being captured by extra-territorial bribery legislation, which is often more rigorously enforced than our own foreign bribery laws. In addition to the extra-territorial reach of the laws of certain western countries, it’s almost certain that any form of bribery and corruption will be a breach of local laws and a number of countries, particularly China, India and Indonesia, have begun to prioritise and increase their corruption enforcement efforts.

The survey found that only 31% of respondents with offshore operations reported having a comprehensive understanding of relevant legislation, up from 25% in 2012. And 40% reported not having (or not knowing if they have) a formal compliance programme in place to manage corruption risk, down from 57% in 2012. And 19% of organisations operating in high risk jurisdictions do not discuss corruption risk at management or board level, down from 21% in 2012.

“Corruption risk should not be a barrier to growth and new markets, but it does need to be properly understood and managed. Organisations operating offshore need to fully understand the risks they face and be confident that their processes and controls are satisfactory to mitigate that risk,” says Mr Jordan.

“While there are encouraging signs pointing to an improvement in comprehensive understanding from the 2012 results, we still have a way to go. There remains a concerning number of organisations that don’t have formal compliance programmes or don’t discuss corruption risk at their highest levels,” he concludes.

To read the full report, go to www.deloitte.com/nz/corruption.

ends

© Scoop Media