The story before COVID -19
The United Nations estimated that the global cost of corruption amounts to an alarming USD 2.6 trillion or 5% of global Gross Domestic Product. According to the World Bank, businesses and individuals pay more than USD 01 trillion in bribes every year.
India's ranking in the Corruption Perception Index 2019, released by global watchdog - Transparency International, has moved down as compared to the ranking in 2018 and now, the country stands at rank 80 among 180 nations. Commonly bribery and corruption are considered to be the cost of doing business in India.
A tectonic shift in the environment due to COVID-19
During extraordinary global events – from natural disasters to wars and pandemics such as the one we are currently experiencing – there is a risk that bribery and corruption can spike again.
The Organization for Economic Cooperation and Development (OECD) has joined enforcement agencies across the globe to spread awareness regarding the possibilities of heightened bribery and corruption risks in connection with the COVID-19 pandemic. During the pandemic, new dimensions of bribery and corruption have emerged, attempting to thwart the progress made in taming the risk so far.
Operating business in lockdown - As most jurisdictions plan to reopen manufacturing units, government officials must assess the ground situation and decide on the tiered reopening framework and standard operating procedures in a post lockdown scenario. There could be a possibility that government officials may insist on a bribe to relax or ignore deviations from standard operating procedures.
Eligibility for economic stimulus – The eligibility for receiving benefits of economic incentives under various government schemes is tied to multiple conditions; and as large amounts of funds are being infused into the economy to alleviate the crisis, corruption risks should not be underestimated.
Availability of medical care – The country is on the verge of a public health emergency crisis as the availability of medical care (both hospital beds and healthcare professionals) is becoming increasingly scarce and is turning the situation alarmingly grim. Bribery has emerged again for access or priority access to medical services, tests and equipment, body collection and burial procedures, circumventing quarantine rules, etc.
COVID-19 preventive procurement system – The government is ensuring that health systems are properly equipped, and other essential items are available in necessary quantities. However, emergency procurement situations become vulnerable targets for corruption.
Fund availability for research and development (R&D) - Huge investments are being made in R&D of testing kits, drugs, and vaccination against COVID-19 which exponentially increases the risk of preferential allocation of funds; and leakages cannot be ruled out.
Expenditure on Corporate Social Responsibilities – The corporate sector has opened its purse strings for various charities and governments to support those affected by the crisis. Inadequate due diligence and minimalistic monitoring might be undertaken around the recipients of such funds and utilisation thereof.
Immediate Tactical Mitigation Framework
To encourage transparency within the firm and to ensure bribery and corruption risks are kept at bay, businesses can adopt several internal measures to strengthen the foundation of integrity within the firm. A few measures which can be adopted are:
- Tone-at-the-top is very important at this juncture. Business leaders must act with integrity and subsequently ensure that their employees are also doing the same.
- Policies and procedures should be revisited to consider changing business dynamics, new corruptions risks and adequate safeguards should be incorporated.
- Use this opportunity to conduct online trainings on ethics and compliance before the sales and frontline staff go back to market.
- Identify and manage “exceptional” compliance approvals requests which may require additional scrutiny at this time.
- Travel, hospitality, and gift expense claims (current or delayed) should be scrutinised in- depth.
- Risk profiling of suppliers and third-party intermediaries would also need to undergo a change, considering restrictions applied to all businesses involved in the supply chain.
- Lastly, the whistle-blower mechanism should be fully functional, and any tip-off should be reviewed thoroughly (internally or taking external consultants) before it is too late to recover.
Long Journey Ahead
While multiple regulatory panels, global watchdogs and advisory agencies continue to provide best business practices and frameworks, a single set of procedures or responses might not fit all organisations or each company’s situation. It is imperative to have an open and honest assessment of the vulnerabilities in each compliance framework in light of the business environment. As a responsible stakeholder, we should identify grey areas and business impetus which make it susceptible to corruption.
Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.