About Me

My photo
Reputability LLP are thought leaders in the field of reputational risk and its root causes, behavioural risk and organisational risk. Our book 'Rethinking Reputational Risk' received excellent reviews: see www.rethinkingreputationalrisk.com. Anthony Fitzsimmons, one of its authors, is an authority and accomplished speaker on reputational risks and their drivers. Reputability helps business leaders to find these widespread but hidden risks that regularly cause reputational disasters. We also teach leaders and risk teams about these risks. Here are our thoughts, and the thoughts of our guest bloggers, on some recent stories which have captured our attention. We are always interested to know what you think too.

Wednesday, 3 December 2014

Managers are Chief Bribe-Givers

The OECD has published a new report analysing 427 concluded bribery cases over the last 15 years.  The results are striking.
  • In 12% of cases, the CEO was aware of and endorsed the bribe;
  • In 41% of cases, other members of management were aware of and endorsed the bribe;
  • External intermediaries such as sales agents and distributors were involved in 41% of cases;
  • 57% of bribes were paid in relation to public procurement and
  • 41% of cases related to bribes paid in well-developed countries.

It is a surprise that bribery is a phenomenon of well-developed countries, but it is a shock that most bribery efforts are approved by mangers or the CEO.

The root causes of bribery have to do with behavioural and organisational risks such as leadership on ethos and values, actual leadership ethos and behaviour and incentives at all levels.  Organisational complexity may leave the board in a rose-tinted bubble, unaware of the extent to which operational units - which may share a language and a country or be in far-flung places - are very different from themselves. Failures in all these areas have their origins in the board, and we suspect that it will not be long before boards themselves are pursued by prosecutors.

All large firms concentrate on bribery as a risk issue.  But how many focus systematically on the root causes?

In our experience, even after the Financial Reporting Council  has made behavioural and organisational risks a board issue, too many Chairmen and Company Secretaries are reluctant to investigate the extent to which their risk management systems have a hole where behavioural and organisational risk should be.

Until they fill that gap, boards will continue to find themselves regularly surprised by the latest crisis to hit their firms.

We won't be surprised: one of the striking findings of 'Deconstructing failure' was that boards' 'inability to engage with important risks to the business' was a root cause of 85% of the crises studied. 




Anthony Fitzsimmons
Reputability LLP
London
www.reputability.co.uk

No comments:

Post a Comment