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Date: November 22, 2024 Fri
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1 results foundAuthor: Kroll Title: Anti-Bribery and Corruption Benchmarking Report - 2018. Converging Third Party Risks: Regulation, Reputation, and Information Summary: EXECUTIVE SUMMARY In today's global, hyper-connected economy, we find anti-bribery and corruption programs in the midst of an evolution that is driven by converging organizational risks and priorities. Regulatory mandates, critical reputational factors, and data security issues are increasingly intertwined as compliance teams strive to protect their organizations from ABC risks. The common thread running through all these risks is the high volume of direct and indirect third parties that partner with and supply services to organizations. Forty-five percent of respondents work with at least 1,000 third parties per year, a six percentage point increase over the 2017 Report. Individually, regulatory, reputational, and data security risks are persistent challenges that compliance and ethics professionals know very well. The convergence of these risks is driving greater collaboration between the organization's compliance and information security teams, which can make for stronger, more compliant anti-bribery and corruption programs. Leadership engagement, always a key and essential contributor to program effectiveness, is especially critical for ensuring enterprise-wide support for compliance efforts. Doing business ethically and maintaining an up-to-date anti-bribery and corruption program is not just about avoiding the pitfalls of reputational or legal risk. Investors are finding that a focus on ethical business dealings can translate into rewarding financial outcomes. By way of example, the publicly traded companies among Ethisphere's 2018 World's Most Ethical Companies ("Honorees") outperformed U.S. Large Cap Indices by 4.88 percent over the last three years, demonstrating that ethics and performance are well-suited companions and valued in the marketplace. Despite the increased focus and engagement of organizational resources on compliance efforts, a staggering 93 percent of respondents believe their ABC risks will remain the same or worsen in 2018. Those who expect greater ABC risks attribute the rise to increased enforcement of existing regulations, followed closely by new regulations. Given these expanding regulatory pressures, a holistic, multidisciplinary approach may hold the key to sustainable improvements in the future. Some key findings from our study include: ABC PROGRAMS: ONGOING CHALLENGES Overall, the results of this year's survey were consistent with those in our last report; namely, that third party risks - particularly reputational issues - were of greatest concern to respondents. In a shift from last year, however, respondents singled out increased enforcement of existing regulations along with the prospect of new regulations as the top reasons why they expect their anti-bribery and corruption risks to grow in 2018. A significant percentage of respondents continue to worry that they are not prepared to address the risks that their third parties present. Indeed, 58 percent of respondents uncovered legal, ethical, or compliance issues with a third party after initial due diligence. Most often, organizations' due diligence practices - such as ongoing and active monitoring - are responsible for bringing these issues to light. However, in a growing number of cases, third parties are self-disclosing infractions, a clear reflection of changing cultural and regulatory trends, including heightened concerns over personal liability. Risk-based segmentation, ongoing monitoring that incorporates regular data refresh, and periodic program evaluations have emerged as best-practice features of effective anti-bribery and corruption programs. OWNERSHIP STRUCTURE RISKS ON THE RISE The most notable year-over-year change in survey responses was the increased concern over opaque ownership structures, which rose this year to become the third most common reason why third parties are failing to meet an organization's standards. However, current mitigation efforts have not translated into confidence for compliance teams: less than a quarter of respondents reported that they are very comfortable with their ability to effectively address the risks associated with beneficial ownership. A global expansion of regulatory mandates that demand attention to ownership is driving much of the greater focus on the matter. Broader societal expectations, however, are also playing a critical role; the potential for significant, long-lasting reputational damage has made the effort to track ownership an imperative. ABC AFTER ONBOARDING: ONGOING MONITORING AND DATA REFRESH In the fast-changing global marketplace, organizations cannot expect that a third party's risk profile and/or ownership will remain static after initial on-boarding due diligence. In fact, regulatory guidance has made ongoing monitoring an expectation for an effective and engaged anti-bribery and corruption program. However, there is no clear mandate as to what monitoring should entail or how often it should be done. To be expected - and consistent with prior data -respondents reported a number of different approaches to monitoring. This year, however, we introduced the topic of third party data refresh into our survey and found many organizations using the practice to one degree or another. Refreshing baseline information on their third-party universe can help ensure organizations are conducting diligence or other monitoring practices corresponding with the actual risk presented by their third parties. With anti-bribery and corruption programs increasingly driven by technology, data integrity is a growing factor in risk mitigation and defense. MERGERS AND ACQUISITIONS Virtually the same percentage of respondents reported their organizations had engaged in M and A activity in 2017 as did in the prior year (62 percent and 67 percent, respectively). However, M and A continues to challenge compliance professionals from an anti-bribery and corruption perspective. The data shows that respondents are still not consistently meeting regulatory guidance, which expects organizations to thoroughly understand who they are acquiring. Similar to last year, respondents report collecting less information on the third parties of their transaction targets than on direct third parties. In a more positive development, Kroll experts have noted that some organizations, particularly those looking to be acquired, are turning this exercise into a competitive advantage. "Clean-up" work on their own third-party universe or supply chains can help make target companies more attractive to buyers and accelerate the transaction process. NEW RESOURCES EMERGE AS ABC AND ENTERPRISE RISKS CONVERGE A convergence of risk factors - specifically regulatory, reputational, and data security - is driving home the realization that greater collaboration and support from resources across the enterprise can help anti-bribery and corruption programs better mitigate risks. Increasingly stringent data privacy laws - including the imminent adoption of the European Union's General Data Protection Regulation (GDPR) - are making information - gathering on third parties a minefield. Across all survey respondents, 85 percent described themselves as somewhat or very concerned about data security risks. Meanwhile, mobile technology and applications such as WhatsApp and WeChat are creating internal vulnerabilities. Growing collaboration between compliance and information security/technology teams is proving instrumental in making due diligence efforts compliant and comprehensive. Overall, ABC programs are receiving greater investments from their organizations; however, nearly half of this year's respondents (47 percent) feel they need more resources. Measuring the effectiveness of programs can be the key to ensuring appropriate funding levels. Indeed, the survey data shows a link between program measurement and high levels of leadership engagement, which plays a critical role in anti-bribery and corruption program effectiveness. Beyond regulatory compliance, leaders are aiming to safeguard brands and organizational reputations. Details: New York: 2018. 28p. Source: Internet Resource: Accessed January 9, 2019 at: https://www.kroll.com/en-us/abc-report Year: 2018 Country: International URL: https://1okg7q3ipr08ql7es2x3ip4634-wpengine.netdna-ssl.com/wp-content/uploads/2018/08/Kroll_2018_ABC_Report_Digital.pdf Shelf Number: 154046 Keywords: ABC ProgramsAnti-BriberyBribery Bribes Corruption Crimes Against BusinessesFinancial Crimes FraudGeneral Data Protection RegulationSecurity Risks |