Corruption a growing challenge

RESOURCES sector executives across the UK and US are increasingly worried about the high percentage of bribes that are now paid either by or to third parties – and it’s a nightmare to police, a new KPMG survey has found.
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Anthony Barich

KPMG surveyed 659 executives in a range of functions and industries from around the world, of whom 54 (8%) worked in the energy and natural resources sector. Of these, 38 worked in oil and gas.

A number of weaknesses to third-party risk came to light in the survey, as 69% of ENR respondents said their companies’ anti-bribery and corruption (ABC) risk assessment examined the potential risk posed by third parties, but 41% said they don’t have a risk-based process for “on-boarding” third parties, the same number as those who said they don’t even have such a process.

“This is an important gap in the program, because a proper procedure to vet third-party agents during the on-boarding stage can prevent the contagion of corruption spreading through the organisation,” the report titled The growing global challenge, said.

“Managing third-party risk is the biggest challenge that companies face across all sectors in the field of bribery and corruption.”

The problem is exacerbated as ENR companies are pushing into lesser-known geological regions, which means risks proliferate and become tougher to measure.

Falling commodity prices are making things that much tougher for compliance functions as they compete with other parts of the business for scarce funding.

KPMG identified two factors are creating new compliance risks for ENR companies: a growing number of governments are tightening corruption regulations or introducing new ones; and secondly, as companies globalise their operations they rely more heavily on third parties than before to do business in far-flung parts of the world, often in areas where there is a high risk of corruption.

“The potential cost of failing to comply with ABC regulations somewhere in the world is significant: sizeable fines, the possibility of imprisonment, and the loss of corporate reputation; but it is expensive to create a framework to prevent, detect and respond to corruption,” KPMG said.

“At a time of weak commodity prices, ENR companies face severe cost constraints in implementing, maintaining or enhancing a framework to mitigate the risk of non-compliance.

“However, by taking the correct approach to the problem, organisations are able to develop a fit-for-purpose compliance framework that manages the risk without breaking the bank.”

The three biggest concerns revealed in the survey were variations in countries’ regulations, the low level of awareness among the workforce of ABC requirements, and training and communications.

About 89% of ENR executives said each of those three factors was challenging; while 80% said it was challenging to audit third parties for compliance.

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