Diagnostic tools for the detection and prevention of intra-organisational corruption
President Uhuru Kenyatta’s emphasis on the war on corruption has placed corruption front and centre of national discourse. Corruption has been defined by Transparency International as ‘the abuse of entrusted power for private gain’, though other definitions exist. The negative impacts of corruption are legion, including: the deterioration of public infrastructure; the failure to provide key public services such as health and education to a high standard; wealth inequality; increased unemployment arising from an adverse business environment and injustice in the legal system, to name but a few.
Whereas focus has been on the public sector, recent revelations have started pointing the finger at private sector interests that may have been involved in less-than-savoury business dealings with the Government. In some instances, even the directors of organisations have been named. One of the possible reasons why the war on corruption has not been successful is the participation of the private sector in corruption. Against this backdrop, it is worthwhile for organisations, both public and private, to review which methods are available to them for protecting themselves from corruption risk. In this article, we will review two tools: Corruption Risk Assessments and Corruption Perception Surveys.
Defining Corruption Risk Assessment (CRAs)
A Corruption Risk Assessment (CRA) has been broadly defined by the United Nations Global Compact as ‘the variety of mechanisms that organisations use to estimate the likelihood of particular forms of corruption within the organisation and in external interactions, and the effect such corruption might have.’
Typically, a CRA would take the form of a review of an organisation’s policies (as articulated on paper and as implemented in practice), its processes, and its practices, with a view to identifying weaknesses that may present opportunities for corruption to occur. Such an assessment should not be conducted in isolation. Care must be taken to understand the environment in which the organisation operates, and which people and/or entities the organisation deals with.
Why conduct a CRA?
CRAs are necessary because simply having an anti-corruption policy provides little or no protection from corruption-related problems. The formulation of an anti-corruption policy may well represent a ‘tick-the-box’ approach to corruption prevention.
A CRA, however, is the first step in the process of preventing corruption because it identifies which processes are prone to risk and should, if effective, develop an action plan to mitigate against these risks.
A companion tool – the Corruption Perception Survey
In identifying the universe of identifiable risks, the CRA process may well benefit from the use of another tool: the Corruption Perception Survey (CPS).
CPSs are surveys that are conducted on an organisation’s important customers, key suppliers, and those entities/bodies to which the organisation may report) with the aim of assessing the views of employees and these stakeholders regarding the nature and prevalence of corruption in the organisation.
It is important to note that perception may not always match reality but may be just as important.
The conduct of a Corruption Perception Survey would involve:
- Defining the survey’s objectives and the uses to which the survey’s results will be put;
- Defining the survey’s target population, including the various target groups expected;
- Drafting the survey questions;
Elements of a good CRA
A credible CRA will have the following elements. It will:
- Identify the universe of corruption-related risks in an organisation. In the public sector, these may include (for example and typically) the procurement process in an organisation, or the processes by which such licences as are compulsory for businesses to operate are issued.
- Rank / prioritise the risks based on a combination of the likelihood of the risk to crystallise, as well as the potential impact should the risk in fact crystallise. It is important to prioritise risks because an organisation may not be able, cost-effectively, to mitigate all risks at the same time and may have to choose which risks to deal with first.
- Formulate practical anti-corruption controls which mitigate against each identified risk. As mentioned before, these controls should be implemented in order of priority.
- Developing an index/ the indices that will be used to gauge the perception of corruption amongst the different target groups in the target population;
- Piloting the questionnaire and refining the questions and the corresponding index / indices;
- Conducting the survey (ensuring a good response rate, including as assessed by target group); and
- Analysing the results (as perception, rather than facts).
Who should conduct Risk Assessments / Corruption Perception Surveys?
Chief Risk Officers need to devote time and attention to the effective conduct of CRAs and/or CPSs. The internal audit department may also conduct these assessments. Often though, organisations can benefit from having an independent, objective advisor with experience of having conducted such reviews across a broad spectrum of organisations and/or of having investigated corruption itself. This approach lends itself to a more thorough and impartial identification of risks and a dispassionate development of effective mitigations.
Conclusion
As the nature and the scale of the risk posed to organisations by corruption continues to change and to grow, organisations need to assess the methods of dealing with the posed risk.
This is especially true because legislation, including foreign legislation such as the United States’ Foreign Corrupt Practices Act (FCPA) and the UK’s Bribery Act and local legislation such as Kenya’s own Bribery Act is continuing to close in on organisations that continue to ignore the risk of corruption.
Corruption Risk Assessments and Corruption Perception Surveys are two complementary tools that both public and private sector organisations can use to proactively detect and prevent intra-organisational corruption.
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