Companies are finding it ever more difficult to deal with issues of bribery and corruption as they expand into emerging markets, a survey has found.
The survey by KPMG and Singapore Management University found that the proportion of respondents who found it difficult to monitor and evaluate compliance with local laws has more than doubled since 2011.
"A growing number of companies are finding it more difficult to deal with anti-bribery and corruption issues because of their complexity, increasing globalisation of their operations and the need to deal with these matters in many different jurisdictions," said Mr Jimmy Helm, the global leader of KPMG's anti-bribery and corruption services.
He added: "There's a greater understanding of the issues faced, but this doesn't mean they are easier to deal with."
There's a greater understanding of the issues faced, but this doesn't mean they are easier to deal with.
MR JIMMY HELM, the global leader of KPMG's anti-bribery and corruption services
The report, based on a global survey of 659 respondents, noted that as companies globalise, their supply chains become stretched.
So corporations are relying more heavily on third parties than before to do business in far-flung parts of the world, often in areas where there is a high risk of corruption.
This is especially worrisome because a very high proportion of bribes are now paid either by third parties to the ultimate recipient or to seemingly unrelated parties acting on behalf of the ultimate recipient, KPMG noted.
Yet, the survey found that too few firms manage such third-party risks, with 34 per cent admitting that they do not formally identify high-risk third parties.
For those respondents that do have a formal process to identify high-risk third parties, only 56 per cent indicated that they have "right-to-audit" clauses in their contracts with third parties.
Mergers and acquisitions pose their own challenges because it is often difficult for the acquirer to know beforehand exactly how the target company does business with governments, KPMG added.
And once a company is acquired, differences in corporate culture, processes and systems can make it hard to integrate the target company into a global anti-bribery and corruption compliance structure.
Compounding the problem is the fact that local anti-bribery and corruption laws differ from one market to another and are often being updated and tightened.
International companies must create a strategy of compliance that is not only global but also takes into account national differences in regulation, KPMG said.
"A global company should have a global compliance programme and perform a global risk assessment, while tailoring its procedures to consider the local environment in which it operates," said Mr Nigel Layton, a partner at KPMG's forensic practice in London.