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How Much Does Corruption Affect Business?

Gina-Marie Cheeseman
| Tuesday June 16th, 2009 | 0 Comments

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“Bribery has become a $1 trillion industry,” according to the World Bank. A 2007 survey of business executives found that 43 percent of respondents believed they lost business because a competitor paid a bribe. FSG Social Impact Advisors estimates that corruption costs $2.6 trillion globally.
Almost 80 percent of the respondents in a recently released survey conducted in November 2007 by PricewaterhouseCoopers International said their company has some form of program in place to prevent and detect corruption. However, only 22 percent are very confident that it identifies and mitigates the risk of corruption.


Slightly less than half said their program is clearly communicated and enforced, while 28 percent said there are problems with either the communication or the enforcement of their anti-corruption program. Only 40 percent of respondents believe their current controls are effective at identifying high-risk business partners or suspect disbursements. Only 25 percent perform proactive risk assessments or monitoring.
Having an anti-corruption program in place and publicizing it is seen as valuable or very valuable to a company’s brand by 86 percent of respondents, and having a public report by an independent auditor stating that an anti-corruption program is in place and operating effectively is considered valuable or very valuable to external stakeholders by 76 percent of respondents.
Sixty-three percent said they experienced some form of actual or attempted corruption, and 45 percent said they haven’t entered a specific market or pursued a particular opportunity because of corruption risks.
Over 70 percent believe a better understanding of corruption will help them compete more effectively, make better decisions, improve corporate social responsibility and enter new markets. A level playing field is believed to be crucial to a company’s future business activities by 65 percent of respondents.
How to Fight Corruption
On June 24, 2004 it was announced during the UN Global Compact Leaders Summit that the Global Compact contains a tenth principle against corruption. The tenth principle states, “Businesses should work against corruption in all its forms, including extortion and bribery.”
Transperancy International has a Six-Step Implementation Plan to fight corruption:
1. Decide to adopt a no-bribes policy
2. Plan how to implement the policy
3. Develop anti-bribery program
4. Implement the program
5. Monitor the program
6. Evaluate the performance
In a report titled Anti-Corruption as Strategic CSR, FSG Social Impact Advisors lists four paths to fighting corruption:
1. Ensure compliance
2. Strengthen collective action
3. Engage demand-side forces
4. Leverage corporate assets
In the World Bank Institute’s guide, Fighting Corruption through Collective Action, it lists three levels to fight corruption:
1. Internal corporate compliance programs: A company needs to create an “ethical corporate culture and implement a strong anti-corruption policy”
2. External communication: A company needs to publicly communicate its standards and policies to employees and partners
3. Collective Action: Using a neutral facilitator is the most successful way to conduct collective action


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