Risky business sparks watchdog warning on Asia-Pacific deals

Australia is immersed in a region with high levels of corruption and companies are not doing enough to combat the problem, research shows.

By InvestSMART · 2 Dec 2011

By InvestSMART ·
2 Dec 2011

Comments

Australia is immersed in a region with high levels of corruption and companies are not doing enough to combat the problem, research shows.

AUSTRALIA is immersed in a region with high levels of corruption and companies are not doing enough to combat the problem, research shows.

Corruption watchdog Transparency International yesterday released data showing that more than two-thirds of countries in the Asia-Pacific region - where many Australian companies do business - were perceived as more corrupt than clean.

''We've got to be on our guard all the time,'' Transparency International Australia executive director Michael Ahrens said. ''The lesson from this annual survey is that every Australian business operating in these risky countries must have in place adequate procedures to deal with this challenge.''

But a survey of senior Australian executives released last week by law firm Baker & McKenzie found that Australian companies were lagging behind global anti-bribery standards. More than three-quarters of respondents said they engaged intermediaries overseas and those from the pharmaceuticals and healthcare sector most often reported that they were at extremely high risk of corruption.

Research commissioned by the Australian Council of Superannuation Investors and released in October found that 126 of the top ASX200 companies were exposed to high-risk sectors or countries. More than 40 per cent failed to publish a policy banning bribery or facilitation payments, lagging behind international peers such as the US and Britain.

The report said shareholders should be concerned.

''In the current environment, the chances of an ASX200 company with international operations, no stated anti-bribery policy, and/or inadequate anti-bribery management controls becoming embroiled in another large-scale corruption scandal over the next five years appear to be substantial.''

But the survey shows the Reserve Bank of Australia scandal has not affected Australia's clean rating.

Australia maintained its position as the country with the eighth lowest levels of perceived corruption out of 183 surveyed.

New Zealand climbed to first over last year's top-ranked Denmark. Somalia is ranked last again. North Korea, which has been measured for the first time this year, was second worst and Burma third worst.

Go to Google News, then click "Follow" button to add us.

Share this article and show your support

Frequently Asked Questions about this Article…

What did Transparency International find about corruption risk in the Asia‑Pacific region?

Transparency International’s annual survey found that more than two‑thirds of countries in the Asia‑Pacific region were perceived as more corrupt than clean, and it warned Australian businesses to ‘be on our guard’ when operating in these higher‑risk countries.

How does high corruption risk in the region affect Australian companies and investors?

The article says Australian companies operating in risky Asia‑Pacific countries need adequate anti‑corruption procedures. Research flagged that many ASX200 firms are exposed to high‑risk sectors or countries, and shareholders should be concerned about potential scandals if controls and policies are lacking.

What did the Baker & McKenzie survey say about Australian companies and anti‑bribery standards?

Baker & McKenzie’s survey of senior Australian executives found local companies were lagging global anti‑bribery standards, with more than three‑quarters reporting use of intermediaries overseas and higher reported corruption risk in sectors such as pharmaceuticals and healthcare.

Why is the use of intermediaries overseas a risk for investors?

The article reports that over three‑quarters of surveyed Australian executives engage intermediaries overseas, which increases corruption risk—particularly in sectors like pharmaceuticals and healthcare—because intermediaries can be a channel for improper payments or practices if not properly managed.

How exposed are ASX200 companies to corruption or high‑risk sectors?

Research commissioned by the Australian Council of Superannuation Investors found 126 of the top ASX200 companies were exposed to high‑risk sectors or countries, and more than 40% failed to publish a policy banning bribery or facilitation payments.

Did the Reserve Bank of Australia scandal change Australia’s perceived corruption ranking?

No. Despite the Reserve Bank of Australia scandal, the survey shows Australia maintained its position as the country with the eighth lowest level of perceived corruption out of 183 countries surveyed.

Which countries ranked best and worst for perceived corruption in the survey?

According to the article, New Zealand climbed to the top spot, Denmark fell from first, Somalia ranked last again, North Korea was measured for the first time and came in second worst, and Burma (Myanmar) was third worst.

What should everyday investors look for regarding corporate anti‑corruption practices?

The article highlights that investors should be concerned when companies lack stated anti‑bribery policies or adequate anti‑bribery management controls. Everyday investors may want to check company disclosures for published bribery bans, robust compliance procedures, and transparency about operations in high‑risk countries.