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Corruption and bribery in New Zealand organisations

September 13, 2012

Bribery and corruption – exposure, enforcement and accountability key risks for New Zealand organisations

Deloitte survey shows that exposure to bribery and corruption is on the rise but risks not being addressed

Managing bribery and corruption risk is set to become an increasingly important issue for New Zealand organisations, particularly those with offshore operations.

But according to the results of the inaugural Deloitte Bribery and Corruption Australia and New Zealand Survey, exposure to bribery and corruption is on the rise and many organisations either do not recognise the risks, or are not addressing them.

Key findings from the responses of nearly 400 organisations and individuals (almost half from New Zealand) include:

• 34% of organisations have operations in high risk offshore jurisdictions, but 48% of these have never conducted a corruption risk assessment, and 21% do not discuss corruption risk at management or board level
• Only 25% of organisations with offshore operations have a comprehensive understanding of relevant anti-bribery and corruption legislation, while 40% said they are not concerned with risks arising from non-compliance
• 14% of organisations that have never undertaken a risk assessment have experienced a foreign bribery and corruption incident in the last five years
• 80% of organisations with offshore operations either do not regard foreign bribery and corruption as a high level risk to their business in the next five years, or said the risk was not applicable to their organisation.

Deloitte Forensic Partner Barry Jordan said bribery and corruption had not traditionally been high on the risk agenda for New Zealand organisations – but this needed to change.

“The landscape is clearly shifting. Particularly with those New Zealand companies looking for growth and new business opportunities offshore. Engaging in corrupt behaviour because it is seen as the way business is done in some locations will no longer be tolerated as an excuse,” he said.

“Stakeholders, including governments, regulators, law enforcement agencies, shareholders and customers are demanding the strongest commitment to ethical business dealings.

“Ignorance and inactivity are no longer a defence, and failure to act exposes directors, senior executives and employees to increasingly serious sanctions.”

Mr Jordan said agencies in New Zealand and Australia, as well as the United Kingdom and United States, were firmly focused on addressing corruption at the corporate level. “Expect to see more attention given to exposing individuals and organisations who look to use corruption to advance their business”, said Mr Jordan. “There has never been an appetite for such conduct in New Zealand and this has not changed.”

Nick Paterson, General Manager, Fraud & Corruption at the NZ Serious Fraud Office said “Organisations need to be awake to the changing environment as well as the legal and reputational risks and consequences associated with engaging in corrupt practices.”

Mr Jordan also noted that “The enactment of the United Kingdom’s Bribery Act in July 2011, and the growing reach of the United States’ Foreign Corrupt Practices Act, will also have implications for New Zealand and Australian organisations operating offshore where, for example, they are doing business with a joint venture partner or investor with financial or citizenry connections to these countries.

“Consequently, awareness of the risks, and how to manage them, has become more important than ever before.

“Managing this risk goes beyond just internal controls,” Mr Jordan said. - An ethical culture mitigates the risk of a legislation breach. Yet our survey results indicate that organisations are encountering bribery and corruption incidents and challenges which many are ill-equipped to identify, manage and, most importantly, prevent.”

Questions posed by the survey results include:
• How much do organisations really know about what is happening in their offshore operations?
• How many realise the high risk corruption presents?
• How many are reliant on joint venture partners and third party agents to do the right thing?
• How can employees and third parties be accountable when an organisation’s position on corruption might be unclear?

Transparency International New Zealand, the local chapter of Transparency International which is dedicated to increasing government accountability and curbing both international and national corruption has supported the Deloitte survey.

Executive Chair Suzanne Snively said: “Transparency International New Zealand’s information suggests that even our largest listed companies are complacent about corruption risk and lack the published principles confirming their business integrity, the tools to carry out business in an ethical manner and the staff training essential to remaining vigilant.”

The full survey report is available at www.deloitte.com/nz/corruptionsurvey

ENDS

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