Wed, Mar 14, 2018

Opaque ownership fastest-growing concern for compliance professionals: Less than 25 percent feel highly confident in their program’s ability to address these risks

New 2018 Anti-Bribery and Corruption Study by Kroll and the Ethisphere Institute shows how companies are hitting a “third party data refresh” for effective risk mitigation and defense

For the second consecutive year, third party violations of anti-bribery and corruption laws top the list of perceived risks for compliance professionals surveyed for the 8th annual Anti-Bribery and Corruption Benchmarking Report (“ABC Report”), a joint study conducted by Kroll and the Ethisphere Institute. The study further reveals how compliance teams are grappling with the convergence of regulatory mandates, critical reputational factors, and data security issues as they try to protect their organizations from substantial financial and reputational harm as well as regulatory and legal exposure.

Despite the increased focus and robust deployment of organizational resources supporting compliance efforts, a staggering 93 percent of the 448 respondents believe their ABC risks will remain the same or worsen in 2018. Those who expect a greater level of ABC risks attribute the rise to increased enforcement of existing regulations, followed closely by new regulations. Indeed, heightened regulatory activity is evidenced in China’s sweeping anti-corruption campaign over the past five years; the UK Criminal Finances Act and France’s Sapin II, both of which became effective in 2017; a host of new anti-bribery and corruption legislation introduced worldwide, including in Germany, Ireland, and Slovakia; and ongoing U.S. Department of Justice and Securities and Exchange Commission enforcement actions.

“The stakes are high and so is the risk level, which is likely causing some sleepless nights for the average compliance professional,” said Steven J. Bock, Global Head of Operations with Kroll’s Compliance practice. “In today’s hypersensitive business environment where a company’s hard-earned reputation can be easily lost through a lapse of judgment by a third party, the job of a conscientious compliance professional has never been tougher or more central to the success or failure of a business.”

The study also shows that while reputational and integrity concerns remain the number-one reason why a third party fails to meet an organization’s standards, the corporate or ownership structure of a third party has emerged as a major concern for compliance teams. Notably, more than half of respondents reported that they were “concerned” or “very concerned” with beneficial ownership risks associated with their third parties, while less than 25 percent feel highly confident in their program’s ability to address these risks.

“Compliance professionals have good reason to renew their focus on the ownership structure of third party companies with which they permit their company to associate,” Bock said. “It’s about both reputation and regulatory risk—if you don’t know the true owner of a company you’re working with, you cannot effectively assess those risks, and corporate structures do not always lend themselves to an easy analysis of that question.” Ongoing monitoring that includes a regular refresh of the underlying third party data emerged among the ABC Report findings as a key strategy for maintaining the effectiveness of anti-bribery and corruption programs overall, and especially for keeping up with potential ownership changes.

The Kroll/Ethisphere report provides good news as well. For example, 36 percent of respondents indicated that their organization dedicated more resources to ABC issues in 2017 than in 2016. Executive leadership support also remains strong, as 92 percent of all survey respondents said that their leadership team is highly engaged or somewhat engaged in their ABC efforts.

“The 2018 Anti-Bribery and Corruption Benchmarking Report brightly illuminates the challenges facing today’s compliance experts, including the likelihood that third party risks will grow in relevance and impact,” said Erica Salmon Byrne, Executive Vice President, Executive Director, Business Ethics Leadership Alliance, Ethisphere. “We are encouraged, however, that partnerships across organizations continue to grow as company leaders assign greater priority to the adoption of best-in-class anti-bribery and corruption programs that protect not only individual organizations, but also the integrity of the global business ecosystem.”

Other findings in the ABC Report include:

  • Regulatory focus on individual accountability heightens personal liability concern: 50 percent of respondents who reported post-onboarding issues with a third party indicated that the issues were discovered through ongoing monitoring.
  • Perceived risk: 65 percent of respondents think that their risk will stay the same in 2018, and 28 percent think it will increase.
  • ABC after onboarding and data: 75 percent of survey respondents monitor some or all of their third parties. Fifty-six percent of respondents whose organizations conduct monitoring opt to refresh third party data.
  • Mergers and acquisitions: 62 percent of respondents indicated they engaged in M&A activity in 2017. Yet the data continues to show that respondents are not conducting appropriate levels of pre-acquisition due diligence.
  • Enterprise risks converge: 76 percent of respondents said they are “concerned” about data security risks related to third parties, while only 56 percent feel prepared to address them.

This 2018 ABC Report will be officially released today at Ethisphere’s 10th Annual Global Ethics Summit in New York City. The Global Ethics Summit is the premier annual event where CEOs, board members, chief legal officers/general counsels, chief ethics and compliance officers, and other business influencers with a diverse set of experiences gather to share best practices in building ethical businesses and continuously improving corporate behavior. Representatives from US companies as well as multinationals attend the summit to learn from an eclectic set of practitioners and to network with professionals who face challenges similar to their own. For live updates from the Summit, please follow the hashtag #GlobalEthicsSummit18 on social media.  

Read the full 2018 ABC Report here

Notes to editors

Kroll and Ethisphere partnered to create the 2018 Anti-Bribery and Corruption Benchmarking Report. Senior-level executives working in ethics, compliance, or anti-corruption worldwide were invited to respond to the survey, which was in field from October 4, 2017, to December 8, 2017.

The survey produced 448 complete and partial responses. Respondents were not required to answer every question.

Nearly half of respondents (46 percent) represented publicly listed companies; an additional 46 percent represented privately held companies, and nine percent identified their organizations as a non-profit or other type of organization. The majority of organizations have headquarters in the United States (58 percent), followed by the United Kingdom (21 percent), Western Europe (21 percent), Brazil (18 percent), and Central/Eastern Europe (16 percent).

Thirty-eight percent of respondents held the title of compliance and ethics officer or chief compliance officer, followed by director (12 percent), and manager (12 percent). A wide range of other titles trailed closely behind, all of them related to compliance or anti-corruption activities.

Respondents represented a wide range of industries. The largest industry group was manufacturing (22 percent), followed closely by finance and insurance (17 percent).
The median worldwide annual revenue of the qualified respondents was $1 billion to $5 billion (U.S. dollars).

This was a self-reported survey from Kroll and Ethisphere’s audience of ethics and compliance professionals, and Ethisphere did not attempt to verify or audit the data reported by survey-takers.

About Kroll
Kroll is the leading global provider of risk solutions. For more than 45 years, Kroll has helped clients make confident risk management decisions about people, assets, operations, and security through a wide range of investigations, cyber security, due diligence, and compliance, physical, and operational security and data and information management services. Headquartered in New York with more than 35 offices in 20 countries, Kroll has a multidisciplinary team of nearly 1,000 employees and serves a global clientele of law firms, financial institutions, corporations, non-profit institutions, government agencies, and individuals.

About Ethisphere

The Ethisphere® Institute is the global leader in defining and advancing the standards of ethical business practices that fuel corporate character, marketplace trust, and business success. Ethisphere has deep expertise in measuring and defining core ethics standards using data-driven insights that help companies enhance corporate character. Ethisphere honors superior achievement through its World’s Most Ethical Companies® recognition program, provides a community of industry experts with the Business Ethics Leadership Alliance (BELA), and showcases trends and best practices in ethics with Ethisphere Magazine. Ethisphere is also the leading provider of independent verification of corporate ethics and compliance programs, including Ethics Inside® Certification and Compliance Leader Verification™. More information about Ethisphere can be found at

Media Contacts:
The Ethisphere Institute
Aarti Maharaj | 646-480-9715 | [email protected]

Ada Oni-Eseleh  | + 1 845.863.7522

Compliance Risk and Diligence

The Kroll Investigations, Diligence and Compliance team partners with clients to anticipate, detect and manage regulatory and reputational risks associated with global ethics and compliance obligations.