KEEP UP TO DATE WITH ALL THE IMPORTANT COVID-19 INFORMATIONCOVID-19 RESOURCE PORTAL

FANews
FANews
RELATED CATEGORIES
Category Risk Management
SUB CATEGORIES General | 

How risk management can be implemented effectively to disable corruption within organisations

02 June 2020 Mpho Modisane, IRMSA Risk Intelligence Committee Member (MBA, IRMSA CRM Prac)

As professionals we should avoid falling prey to corruption. Corruption robs both the public and private sector to the extent of eroding our individual professional brand and that of our companies (reputational risk), it undermines the employees of both sectors who are truthfully and impartially committed to their professions.

Corruption is defined as any conduct or behaviour in relation to persons in private or public sector entrusted with responsibilities in their office, which contradicts their duties, and which is aimed at obtaining undue benefits of any kind for themselves.

Although most companies and government departments have clearly articulated policies that condemn fraud, bribery, extortion, misappropriation, favouritism, kickbacks and other forms of corruption, these policies don’t seem to be working as intended hence corruption keeps rearing its head.

Corruption inhibits possible foreign investment, stifles economic growth, and undermines efforts towards achievement of sustainable development. It further undermines the various layers of controls created by companies, member organisations such as IRMSA, legal and judicial systems. Corrupt individuals and businesses who pay bribes to avoid complying to set rules, laws and regulations continue to benefit unduly by securing tenders, contracts, and favours at the expense of those who choose to uphold high ethical values. Many have lost their lives while fighting corruption and people’s lives continue to be threatened where there seems to be pushback. This renders the fight against corruption a more complex one.

Most concerning to risk professionals is that corruption leads to other possible related and unrelated risks materialising. For example, if a private sector service provider pays kickbacks to a government department employee in order to secure a tender to provide a particular service, the service provider may not be able to deliver the service at the required standard or in extreme cases, not deliver the service at all. If the government department was intending to address a particular risk by putting in place controls with this service, it means the risk will highly likely materialise as a result of controls not being applied.

David Lewis, the Executive Director of Corruption Watch, explains that one of the lessons we have learnt from our country’s recent past is the role played by private-sector companies and professions in facilitating public and private-sector corruption. These include members of the legal and auditing professions, tax advisers and management consultants, and real estate agents. Lewis further explains that the work of their organisation as a corruption watchdog going forward will focus increasingly on these identified facilitators of corruption.

To make the risk of corruption prominent in our organisations we need to create scenarios in our risk discussions which demonstrate instances whereby corruption risks can materialise. The jargon used in the scenarios has to be relevant and at the most, be specific to the organisation. Where controls don’t work as intended, alternative or a combination of controls should be applied to deal with weaknesses. For example, to treat collusion, staff rotation can be used and supplemented with automation of certain processes.

Corruption undermines the efforts of professionals in the private and public sector who live up to their mandate, and as risk professionals we need to protect the controls created through member organisations, watchdog agencies and legal and judicial systems. Risk management can be a useful tool to ensure that these controls are adhered to and where they are inadequate, risk managers must ensure that additional measures are put in place.

One of the benefits of risk management is that when it’s done intelligently, it can contribute immensely towards the eradication of fraud and corruption, create sustainable value as well as protect and enhance reputation.

In these unprecedented times, the risk manager’s role in the fight to corruption is more important than ever and as a risk professional you need to ask yourself the following questions about your organisation. Have you:

• Considered corruption as a potential risk?
• Created scenarios relevant to your organisation to demonstrate instances where corruption risks can materialise?
• Does corruption feature in your risk register?
• Are controls applied to deal with weaknesses in implementation of policies to treating corruption risks?
• What additional treating strategies have you implemented to proactively identify instances whereby individuals in your organisation could facilitate private or public sector corruption?
• Are these controls effective enough to disable possible facilitation of corruption?

For more information on “Corruption Risks” go to the IRMSA Risk Report 2020.

References

Annual Report: Corruption Watch, (2019). The Writing is on the wall (Page 13).

Ionescu, L. (2011). Fraud, corruption in the private sector and internal control of quality. Faculty of Financial and Accounting Management. Spiru Haret University, Romania.

Vyas-Doorgapersad, S. (2007). Corruption in the public sector: A comparative analysis. Department of Governance, North West University, South Africa.

Quick Polls

QUESTION

Can we really afford to ring-fence this cash for retirement when we have real 'life and death' money issues in the present? Should retirement fund assets be more accessible to members?

ANSWER

Yes
No
fanews magazine
FAnews June 2020 Get the latest issue of FAnews

This month's headlines

The crisis is not over
Ethics of lockdown - What value is attached to a human life?
Pandemic redefines the commercial and legal risk landscape
New partnerships needed to create an epidemic and pandemic risk programme
Credible statistics create much needed certainty
SA fixed income: Searching for value in a sea of pandemic risk
Subscribe now