Due Diligence: New Study Shows Companies Fall Short

A new survey by business consulting firm Alix Partners sheds new light on international corruption, and business attitudes toward due diligence. The findings show that most companies still have a long way to go toward properly addressing corruption and bribery issues.

Several key results from the survey raise alarms. Among them, the fact that fewer than half of those survey conduct due diligence on their third-party partners on a regular basis. In some cases, that's a high average: on 29 percent of respondents from Europe, for example, said they perform regular due diligence checking. Here are some of the reasons cited for not doing proper checks:

Respondents said the biggest obstacles to their companies' anti-corruption efforts and ability to mitigate risk areas were staffing constraints (65 percent); variations in local country regulations covering, for instance, data privacy (65 percent); and pressure to deliver operating results (58 percent). – Compliance Week

On the flip side of that coin, as reported in the Wall Street Journal, “nearly one in three respondents said they stopped doing business with certain partners because of concerns related to corruption.”

Which countries or regions are perceived as being highest-risk in terms of corruption? The survey covered that, as well. The results, starting with the worst (most corrupt):

  1. Africa (56 percent)

  2. Russia (53 percent)

  3. Middle East (49 percent)

  4. Central and South America (48 percent)

  5. Mexico (48 percent)

  6. Southeast Asia (46 percent)

That's bad news for anyone looking to expand into any of the above, especially with companies now being held more liable for not performing proper due diligence. Indeed, laws and regulations such as the UK Bribery Act, FCPA and other controls have created a mandate for business owners and leaders to be proactive in preventing corruption. This extends to their third-party relationships, and to not do proper due diligence can mean sanctions and even criminal charges down the road.

It's a risk no successful, expanding business should ever take. As the survey shows, the problem of corruption shows no sign of abating worldwide. However, let's hope that when they conduct this survey again – whether it be a year, or two, or five years from now – the results are different. Only when companies fully address their need to do thorough, consistent due diligence and risk management will we see a decrease in corruption worldwide.