Our Survey Insights
of survey respondents expect their organization’s risk to persist in 2017.
57%
The majority (57 percent) of survey respondents expect their organization’s risks to persist at the same levels as last year, 35 percent expect increased risk, and 8 percent expect decreased risk this year. For those who felt their risks would rise, the main reasons cited were more third party relationships and an increase in global regulatory enforcement—both factors out of the compliance officer’s control. Those who reported a decrease in risk from last year credited the improvement to investments made in their programs.
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According to a majority of respondents, the risk landscape for bribery and corruption is not improving. Fully one-third of respondents expect their risks to actually increase in 2017. 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).
What are the biggest perceived THREATS to ABC programs?
M&A: Sixty-seven percent of survey respondents report that they had engaged in M&A in 2016, a 5 percentage point increase over 2015. Yet the data shows that respondents are not conducting the levels of due diligence we would have expected on M&A targets or on targets’ third parties, particularly in light of applicable regulatory guidance.
M&A ACTIVITY
Despite being challenged on multiple fronts with managing their organization’s anti-bribery and corruption efforts, many respondents say they are getting invaluable support from their Chief Financial Officers. This is not surprising, as the Chief Financial Officer and the Finance team often have insight into the operations of multinational enterprises through their dealings with complex cross-border accounting controls and awareness of customs regarding local payment terms.
The chief financial officer and finance team
New lines of defence
Reputational risk is on the minds of most respondents, reflecting an understanding of the importance of the company’s reputation in the eyes of its stakeholders, including employees, customers, regulators, shareholders, and investors. General reputational concerns went from being the least likely reason for a third party to fail a company’s vetting standards to now being the most likely reason—a stunning change in just one year.
REPUTATIONAL RISKS
Issues often arise after initial screening and due diligence. More than half (55 percent) of 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. Third party concealment poses another problem: One-third of respondents indicate that the third party concealed the issue during onboarding.
of respondents report issues with third parties after initial screening and due diligence.
55%
Respondents continue to be concerned about personal liability, with one-third of respondents reporting a greater level of concern in this area than the prior year. This builds on the significant increase in personal liability concerns that spiked in findings from the 2016 ABC Report among risk professionals, especially those working in regulated industries.
Managing anti-bribery and corruption programs comes with personal risk
PERSONAL LIABILITY
Compared to 53 percent of respondents in 2016, only 51 percent of this year’s respondents feel they have sufficient resources to support their anti-bribery and corruption efforts. Overall, approximately 54 percent of respondents indicate that their organizations had dedicated about the same amount of resources in 2016 as they had in prior years, while 38 percent note they had dedicated more resources.
2017 ABC RESOURCES
With complex third party networks becoming the norm, respondents have found that significant issues often arise post-onboarding. Respondents attribute issues to a wide variety of reasons, including misconduct that arose after the initial onboarding, noncompliant behavior that was concealed or otherwise not disclosed by third parties either pre- or post-onboarding, and red flags not discovered because of inadequate initial scoping regarding the depth of the initial due diligence. On the other hand, the results show the most common way third party issues are identified post-onboarding is through continuous monitoring and due diligence.
How do POST-ONBOARDING ISSUES with THIRD PARTIES come to light?
