Corruption risk deters investors. 55% of South African companies surveyed state that they avoid certain countries if the corruption risk is perceived to be too high. This is one of the key findings of the annual survey “International attitudes to corruption” published by Control Risks, the global business risk consultancy.

Corruption risk is a major cost to honest companies. 61% of South African companies have already pulled out of a deal at least once due to the risk of corruption, despite already invested time and money. This is much higher than the global average (41%). This risk-averse approach is underlined by other strong prevention measures: 54% of South African companies have procedures in place for corruption risk assessment (global average is only 39%) and 57% have a standard procedure for integrity due diligence on business partners.

The greatest risk is still seen in transactions associated with routine governmental transactions (perceived as very high, 46%, or high, 42%).

South African businesses are in favour of strong anti-corruption laws. 85% of respondents are of the opinion that the laws improve the business environment for everyone. Although many challenges remain this is higher than the global average of 81% which is a positive indicator of changing attitudes to corruption.

Although compliance programmes are crucial and the general trend is positive, reliance on a legalistic approach to compliance can be dangerous. Most (51%) of global respondents have conducted no internal corruption investigations in the past two years, highlighting the danger of waiting passively for a whistle to be blown, and perhaps suggests a culture of complacency in some organisations.

George Nicholls, Senior Managing Director, Control Risks Southern Africa comments:

“Too many businesses are losing out on good opportunities to corrupt competitors, or choosing not to take a risk on an investment or entering a new market in the first place for fear of encountering corrupt practices.

“Companies need to find a balance and spot the points of light in countries that may otherwise appear as no-go areas. Individual regions and businesses within them vary enormously and careful evaluation should be undertaken. 

“The other concern raised is an overreliance on compliance. Often when organisations have comprehensive compliance processes in place, business leaders treat them as a safety net and don’t undertake independent reviews ruthlessly enough, or reward good behaviour and incentivise teams to prioritise ethical behaviour over financial performance.”

The full survey can be downloaded here: Corruption Survey 2015/16