I recently came across Risk Advisory’s Corruption Challenges Index.
My reaction to the Corruption Challenges Index is the same as my reaction to other rankings of corruption published by for profit companies: does the compliance community really need surveys or formulas (such as C = T – O read more below) to tell us things we already likely know? (See here for the prior post).
Without the Corruption Challenges Index and its crafty formula, many in the compliance community probably already knew that countries like Turkmenistan, North Korea, Libya, Somalia, and Syria are more “challenging” compared to countries like New Zealand, Australia, Singapore, and the United Kingdom that are less “challenging.”
Without the Corruption Challenges Index and its crafty formula, many in the compliance community probably already knew that the “corruption threat” is higher in countries like the Central African Republic, Libya, Yemen and Afghanistan compared to countries like Denmark, Finland, Germany and Ireland.
Without the Corruption Challenges Index and its crafty formula, many in the compliance community probably already knew that countries like Turkmenistan, North Korea, Laos, and Somalia were more “opaque” than countries like New Zealand, the United Kingdom, and Australia.
So if the Corruption Challenges Index (and other similar rankings and surveys) really don’t tell us much compared to what we already likely know, what is the point of these surveys?
My own two cents is they are mostly just an effort to market products and services and a way to generate media coverage. (Indeed, I received a press release about the Index, suggested “key quotes” and an invitation to speak to Risk Advisory personnel).
Set forth below is how Risk Advisory explained its methodology.
“The Corruption Challenges Index is compiled by due diligence experts from Risk Advisory’s seven regional business intelligence teams, with country risk scoring from our Security Intelligence & Analysis Service (SIAS).
The index assesses corruption threat, regime instability and accessibility of information in 187 countries to arrive at a ‘Corruption Challenge’ score, and a resulting ‘Most Challenging Jurisdiction’ ranking. In countries where the threat of corruption is elevated, integrity due diligence performs an essential risk management function. But when information is scarce or unreliable, specialist knowledge and research skills are needed. The most challenging countries are those where the threat is high and due diligence is difficult. The index is designed to quantify this nexus.
Our experts were asked to grade each country on the likelihood of two scenarios; 1) foreign investors encountering corruption in seeking a significant government contract, licence or permit, and 2) a business operating locally enduring small scale official corruption to undertake day-to-day operations. These scores were added to a regime stability score to arrive at a Corruption Threat rating (T).
This is offset against an Opacity score (O), which is based on our experts’ assessments of the comprehensiveness and reliability of public information, media openness, the freedom of human sources to converse and particular linguistic barriers such as transliteration or complex translation. Variables also include how accessible certain public records are, such as corporate filings, litigation filings, and media reporting.
The Corruption Challenge score (C) subtracts Opacity (O) from Corruption Threat (T);
C = T – O
The index’s most challenging countries are those assessed to have a high risk of both petty and grand corruption, less stable regimes and low availability of public information and business intelligence.
In addition to building the index we also asked our analysts to consider the three business sectors that are most exposed to corruption in each country. It’s based on more than 500 investigations we have conducted over the last 12 months. We were then able to produce regional and global frequency analyses based on this data.”
Strategies For Minimizing Risk Under The FCPA
A compliance guide with issue-spotting scenarios, skills exercises and model answers. "This book is a prime example of why corporate compliance professionals and practitioners alike continue to listen to Professor Koehler."
Order Your Copy
