Chinese Businesses Face the Biggest Corruption Challenges

Chinese Businesses Face the Biggest Corruption Challenges

China is the country where businesses face the most potent combination of corruption risk and difficulty in obtaining a clear picture of the local business environment, followed by Iraq and then Nigeria. This is according to new analysis from global risk consultancy The Risk Advisory Group which found that companies can expect to encounter more corruption challenges in Asia and in Africa than in any other region – and least in Europe.

The Risk Advisory Group’s Corruption Challenges Index ranks 181 countries using a number of measures, including:

  • the local threat of corruption;
  • how exposed foreign investors are to corruption itself as well as to FCPA enforcement action;
  • the availability of reliable information to conduct integrity due diligence and mitigate the risk of dealing with corrupt parties.

The rankings reflect the expert judgement of Risk Advisory’s analysts and their experience of helping organisations investigate and do business in those markets.

Enforcement actions under anti-bribery legislation such as the US Foreign and Corrupt Practices Act (FCPA) can greatly elevate the risk to businesses operating in a jurisdiction, and the high number of FCPA cases involving China is one of the main reasons for its top spot in the index. A high corruption risk rating by Risk Advisory’s analysts, a censored press, and poor quality or hard to access public information were the other common features of the countries labelled as most challenging.

At the other end of the spectrum, Europe generally performs well in the index and dominates the list of least challenging countries. It makes its first appearance at number 28, with Greece, which although not assessed to have the highest risk of corruption in the region (that position is held by Bulgaria), presents significant challenges for foreign investors. Highly fragmented corporate databases and a lack of reliable local investigative sources make the country an extremely problematic place to conduct due diligence investigations, particularly for non-native Greek speakers.

Industry sectors are also ranked, with construction and development, infrastructure, oil and gas emerging as the most challenging from a corruption point of view.

Bill Waite, Group Chief Executive Officer of The Risk Advisory Group said, “High levels of corruption risk need not preclude a market from a company’s expansion plans for 2017. And indeed in certain industries the riskiest countries are often the most rewarding. The key to overcoming the challenges is to have a robust risk mitigation programme in place, based on adequate integrity due diligence.

“However, as Risk Advisory’s index shows, the ability to obtain the right information for due diligence varies enormously from one jurisdiction to the next. This is why having access to investigators with local experience, networks and language capabilities can greatly enhance a business’ chance of success.”

(Source: The Risk Advisory Group)