Thank you for the thought provoking insights Brent!

Dear Brent,

Thanks for your valuable comments! I agree that the best way
to protect the company against the described cases is preparation. In global
companies this can be done with internal local Compliance experts, smaller
companies can use external resources.

Compliance is part of the sustainability concept, which includes
also social responsibility. Social investments foster the respect of local
stakeholders and reduce corruption risks, but, of course, have to be monitored
to ensure that such payments not get used for personal benefits.

I have worked in some of the most corrupt countries on the planet, and would
like to add that that while corruption involving bribes are main the focus, we have found that non-financial corruption is probably as or even more common, is the most difficult to detect, and has often had catastrophic impact on FDI projects.

Large multinational firms usually concentrate on high value / profit projects, and are able to assign whatever level of resources, procedures, protocols and staffing needed
to identify and control corruption.

Smaller firms generally have lower value contracts, usually with tight(er) profit margins and must find more efficient ways of dealing with it.

Corruption that involves direct financial transactions, whether as bribes, bid rigging,
or preferential awards of contracts leave tracks, and these can usually be discovered assuming that anyone looks hard enough. Most firms concentrate their anti-corruption efforts on auditable methods, and most ignore the softer social capital, networks and community relationships.

Corruption that involves those in a position of trust misusing it for their own gain, often through backchannel collusion or manipulation of the local system, but who do
not receive direct financial gain, do not leave auditable tracks, and trying to identify, quantify, and establish a burden of proof is often impossible.

Examples we have seen include where corruption was used to effectively hijack foreign investments and where locals were able to assume effective control of
multimillion dollar investments at no cost to them; where corruption encouraged local
partners to strip out millions of dollars of assets; or as we have seen in several cases, where corruption simply squeezed until the foreign investor went broke and abandoned the project. In none of these cases was any link to financial reward made to those involved.

In our experience, the best way to combat this type of corruption is not at the corporate policy level, rather on the training and development of the “boots on the ground” front line / in country managers, project managers, and must in all cases involve building strong social capital links with the local communities at all levels.

Especially for smaller firms who lack the resources of the big players, becoming an influential member of the local community / society and building the social capital to a
point where it is possible to identify, deflect, and then manage corruption has proven highly effective.

Unfortunately that is something that has to be developed on a case by case basis, and is not something that corporate directives or forensic audits can hope to accomplish.

Bottom line is that combating corruption must be a high level corporate priority, but also that it is a complex issue, and while audits and procedures can help, it takes a comprehensive and aggressive program to manage.