Many compliance officers have voiced frustration that their boards don’t take the anti-corruption compliance issue seriously; that is, that they treat it as a purely legal issue and not as a strategic concern that could significantly impact business development.
For many boards, the sole purpose of an anti-corruption compliance program is to mitigate a (very real) legal risk. They espouse the point of view that, albeit justifiable in terms of legal protection, anti-corruption compliance programs represent a ‘non-value generating’ cost center. Boards therefore seek to keep the functioning costs - travel, training, due diligence, number of team members, etc. - to a minimum.
In return, all they expect from their anti-corruption compliance program is that it minimizes the risks brought about by their sales operations. In short, it should offer boards a certain level of protection from a risk which they perceive to be purely legal.
Corruption is not just a legal risk
But what if corruption were not just a legal risk? What if it were, above all, a business risk? This is where compliance officers have some serious board-level convincing to do.
Corruption poses a more serious threat in terms of business development than it does in terms of prosecution; this is the message that every company’s top management would do well to integrate.
The reasoning is simple. A salesperson relying on bribes to secure a contract’s signature, will rarely, if ever, voluntarily inform his management of his wrongdoing. Firstly, because he knows that paying bribes is illegal; secondly because the salesperson would rather have management believe that he is good at sales. Either way, management is lulled into believing that the company signed the contract because its products/services and pricing best fit the demands of the client.
But management is lacking a crucial piece of information - the actual reason the company won the contract -. Management will be under the illusion that its offer meets market demands. Why question one’s prices, products or services when clients are visibly satisfied? Without question, bribes distort the market feedback crucial to making strategic decisions.
Bribes hide market’s real needs
Over time, bribes hide the widening gap between a company’s product and the market’s needs. While losing contracts generally helps companies re-evaluate and re-adapt their offers to better meet market demands, winning contracts in exchange for bribes seriously threatens their competitiveness and, ultimately, could jeopardize their very existence.
To operate, companies constantly take the measures necessary to guard against a multitude of risks: stock market fluctuations, trademark protection, etc. But there is one risk that companies can never insure against: the risk of no longer being able to meet market demands. Only the lessons learned from repeated failures and from difficulties encountered by sales operations can help management make the appropriate strategic decisions in terms of investment, R&D, restructuring production capacities, etc. to turn the ship around before it is too late.
Bribes are a business risk
Corrupt sales practices represent more than a legal risk; they impose a major business risk by jeopardizing the quality of strategic decisions.
When trying to convince your board about why anti-corruption compliance is important, talk first about its impact on strategy and business development. This is how I’ve seen many executive committees finally take the issue seriously.