International NGOs: What does Deloitte's new bribery and corruption report mean for you?

This week, Deloitte published One Step Ahead, its 2017 bribery and corruption report. It provides insights from Deloitte’s survey of Australian and New Zealand risk leaders, asking about their perception and experiences of domestic and foreign bribery and corruption.

International NGOs operate in some of the most high-risk jurisdictions in the world, often in the bottom half of the Transparency International (TI) Corruption Perceptions Index. So what are the implications of the report’s insights for such organisations? This article suggests four key questions for your internationally-operating NGO.

1. Do you recognise the reputational risk – and how to manage it?

There is a disconnect between the perception of reputational risk and the action taken to manage it.

Deloitte’s report notes rising public scrutiny and political concern in Australia, with a number of recent initiatives including a Senate review of Australia’s legislative and policy framework on corruption, the consideration of Deferred Prosecution Agreements, proposed changes to whistleblower protection and beneficial ownership legislation, and a proposed new corporate offence of failing to prevent foreign bribery. These measures arise as Australia appears to slip down TI’s index. Further, survey respondents overwhelmingly saw reputational impact as the most serious consequence of incidents.

And yet despite this dizzying acceleration, Deloitte’s survey actually implies a slowdown in the progress of organisations. Detection rates and the perception of the risk were broadly consistent with 2015, and almost half of respondents did not even intend to upgrade their anti-bribery and corruption frameworks in the next five years.

International NGOs will recognise the reputational dimension, often perceived to impact upon fundraising. But they may also recognise the slowdown. There’s a paradox here and it begs the question – are you best managing the risk? Considering reputational risk after an incident has occurred is too late – it needs to be a driver for investing in meaningful prevention and detection systems.

2. What does ‘risk assessment’ mean to you?

One of the report’s most surprising findings was the under-use of risk assessment. This might not surprise international NGOs, however; my counter-fraud colleagues and I have found the quality and extent of risk assessment in the sector to be patchy at best.

The problem is often in how it is seen. Is it a dry, bureaucratic, tick-box activity carried out for donor proposals and then forgotten about – or a powerful and creative tool for building resilience, evidencing stewardship, and quality-assuring your NGO’s anti-corruption approach?

The narrative we create around risk assessment, and the space we make for it, is critical. For example, I have delivered fraud and corruption training all over the world and people love risk assessment exercises – being invited to think about how they might defraud their organisation, and what could stop them! We can harness that intelligence. For example, consider proper risk workshops, horizon-scanning, ‘red-cell’ thinking, and reflect on how risk management is framed to your staff.

3. How effectively are you managing conflicts of interest?

The biggest proportion of incidents reported were conflicts of interest, with personal favours not far behind. This may resonate with NGO managers; anecdotally, conflicts of interest in procurement and recruitment can be a real issue.

There is often scope for improvement in how conflicts of interest are identified and managed. Because the process is often reliant on self-declaration by those who are not necessarily incentivised to declare, compliance is not automatic. Good conflicts of interest frameworks need to be simple, well-communicated, focused on heightening transparency, and subject to ongoing reinforcement.

4. What do you say, and what do you incentivise?

Respondents most frequently declared organisational culture and tone-at-the-top as the greatest preventative factors. I have written about the link between culture and corruption risk for NGOs before (here and here), but in my experience most NGO managers believe they set the right tone and have the right culture. The problem here is that by culture and tone, we don’t just mean what you say and how you say it, we also mean what you incentivise and are perceived to permit. In my book, I describe how tone at the top is about not just words, but actions. For example:

• Did you take the right action over that manager who might have given a contract to his sister’s company?
• Did you ask the right questions about that mysteriously rapid movement of humanitarian equipment into that high-risk jurisdiction when other agencies were held up at customs?
• Do you include anti-corruption objectives into personnel appraisals and job descriptions?
• Are the objectives and timelines for projects and programmes set at such an ambitious level that you inadvertently incentivise corruption?

Your staff, volunteers, institutional donors and private supporters are watching. Crucially, so are your beneficiaries.

The views expressed here reflect the author’s own and do not necessarily represent the views of Deloitte. To read Deloitte’s report, head over to the website here.

This article was first published on secondmarshmallow.org.

To read more about how to deter, prevent, detect and respond to fraud and corruption in humanitarian and global development work, make sure you pick up a copy of my book, Fighting Fraud and Corruption in the Humanitarian and Global Development Sector (Routledge, 2016). It's out now and packed with relevant material!