Corruption is an issue affecting private and governmental organisations around the world. For private organisations, corruption take many forms, like an employee taking home a stapler or something more serious like upper management breaking the law to close a business deal.
In the workplace, corruption not only causes direct monetary loss but also:
- Affects employee morale
- Makes you liable to criminal prosecution
- Damages your company’s reputation, impacting how customers and potential employees perceive your organisation — bad reputation is an unmistakable sign of a bad company culture and, therefore, affects your employer brand
It’s clear that the impact of corruption on your company can be catastrophic, and as a business owner, you need to take all necessary measures to prevent it. In this article, we will walk you through concrete steps you can take to this effect.
1. Review your company’s policies
The need to work ethically and not engage in corruption or fraud is a concept that must be transversal to your organisation and, therefore, not limited to one isolated policy. Anti-corruption policies interact and need to be embedded into broader policies for them to be effective.
Make sure your company’s policies clearly state there is zero tolerance for corruption or fraud, and what the consequences are for those involved.
When drafting your policies, make them short and concise, as this will make it more credible and understandable.
2. Offer anti-bribery training
Even though people certainly understand what is right and wrong, they may not be aware of all the forms of bribery that exist. For example, employees may not think that accepting a non-monetary gift can be a form of bribery, so you need to make sure that everyone is properly trained on what constitutes bribery and how to report it.
Anti-bribery training not only reduces risk for your company, but it also ensures your employees are acting in a way that is reflective of your company’s ethical standards. People want to work with companies they can trust, so behaving ethically is key to your company’s reputation and, ultimately, its success.
3. Focus on the culture
It is not enough to state your ethical standards in your core values and have them embedded in your culture. You also need to create a safe and encouraging environment for employees to report corruption and bribery.
Employees must understand that behaving in an ethical manner doesn’t only mean acting in accordance with the standards you have set for the company but also speaking up when they see wrongdoing by another employee.
If you want your company culture to encourage ethical behaviour, consistency is key. Make sure that:
- Employees see immediate action being taken when a report is filed
- The action taken is in line with what your policies and procedures state
- There is no retaliation or negative impact whatsoever for those coming forward
- There are consequences for those involved in corruption, also in line with what your policies and procedures state
Tips by employees are one of the most effective ways to detect corruption or bribery. In fact, the 2020 Report to the Nations, a global study on occupational fraud and abuse, found that 43% of occupational frauds were detected by a tip.
Keep in mind that it’s much more effective to reinforce positive behaviour than only focusing on what employees must avoid.
4. Create systems of review
A lack of adequate internal controls can result in many issues for your company. When it comes to corruption, this may even put you in a tough spot with the government, creating high risk for your company.
Make sure you have systems in place that will regularly review financial records and business transactions, and that are efficient in flagging any wrongdoing.
Having systems of review in place won’t only allow you to detect potential issues but also reduce liability for your organisation.
5. Watch out for red flags
You should definitely look closely at anything that seems unusual, and search for an explanation if something doesn’t make sense.
There are many red flags to watch out for, including:
- Unnecessary purchases
- Poor quality on a purchase being accepted (especially after this concern has been raised by others or someone other than the employee made a complaint about it)
- Inaccurate or incomplete information on expense reports
- Unqualified vendors getting your company’s business
Any of the above situations merits a close look and an investigation to detect if an employee is engaging in corruption.
If you have employee monitoring software in place, you could also review the data it provides to ensure employees act in a compliant manner.
6. Check financial transactions
Keep an eye on all financial transactions taking place and check for any irregular activities and expenses that don’t comply with your company policies.
If you have a budget for entertaining customers, for example, make sure every expenditure is accounted for and that the corresponding receipts and expenses are in line with the budget.
Additionally, check historical records to determine if there are any inconsistencies with what you usually spend on certain concepts.
If you have different teams in charge of the same tasks, responsibilities or deliverables, make sure what they spend is at the same level. Employees incurring on larger expenditures that colleagues in the same roles must be able to properly justify that difference.
Be consistent with how often you run these checks and make sure there’s a system in place that can flag unusual transactions.
7. Start from the top
When aligning employees to your ethical standards and providing corruption prevention training, starting from the top is a must.
Even though employee or manager-level personnel are more often likely to engage in corruption than upper management, corruption by top management is much more harmful and it can result in considerably larger losses.
Top management needs to model the behaviour you want the rest of your employees to follow. If they’re properly trained and they embody your ethical standards, then there will be consistency between what you preach and what actually happens in your organisation.
If management is aligned and properly trained, they can provide a safe haven for employees reporting corruption. Whistleblowers will feel safe to report if they see commitment at the top of the organisation.
8. Hold third parties accountable
Any company policies and anti-bribery laws you apply to your organisation must be also applied to any third parties you engage in business with.
It is key to conduct due diligence before you go into business with anyone or before you retain another company’s services. Due diligence is performed to make sure that the third party you are engaging with is a legitimate entity, is properly qualified to provide the services you have retained it to perform and has ethical and legal standards aligned with those of your company.
You also need to get the third party to sign an agreement stating that it will remain in compliance with any anti-corruption laws that apply to the country where your company does business.
9. Set clear whistleblowing procedures
As mentioned earlier, corruption is most often detected by tips or complaints that people file. Therefore, having well-defined whistleblowing procedures in place that allow employees from every rank to report their concerns and come forward with corruption claims is key to preventing corruption.
Whistleblowing procedures will only be effective if they help employees feel safe when reporting. To that end, they must:
- Clearly identify the types of situations that can be reported
- Explain to whom the reports should be made — some HR solutions companies provide a point of contact outside the organisation for employees to raise concerns regarding wrongdoing
- State that the confidentiality of the whistleblower’s identity is safeguarded and that they will be protected from retaliation, and explain how
10. Take corruption claims seriously
Follow through with what you established in your whistleblowing procedures. Employees need to know corruption claims are taken seriously, or they will stop reporting them, and you will lose a valuable source of information.
Showing consistency between what you say you will do and what you actually do when a concern is reported will improve company culture, ensure employees keep coming forward and improve overall employee wellbeing.
When implementing tighter controls, you might find some resistance within your organisation. Anticipating potential conflict, and preparing for it in advance, will improve your chances of employees aligning with your new policies and standards and, therefore, their success.
Always remember that corruption puts your organisation at risk and can severely damage your reputation. In a world where consumers are looking closely at the ethical standards of the companies that they choose to spend their money on, this becomes even more impactful.
Got a question or want to share a tip? Let us know in the comments section below.
This article is an update of an earlier version published on 20 November 2014.