Corruption is a perennial issue when operating a business in Russia. Russia ranked 133rd out of 176 countries in Transparency International’s Corruption Perception Index in 2012, indicating that operating in a compliant manner in the market remains challenging.
However, all too often the conversation about corruption in Russia at the corporate headquarters and regional levels is about a general anxiety about perceived levels of corruption, rather than a pragmatic conversation about the realities of where and how corruption occurs. This results in EMEA (Europe, Middle East, and Africa) executives being asked to “prove” that any further investment in the market will not lead to increased corruption exposure – a task that is clearly impossible and leads some highly risk-averse companies to underinvest in the market.
All too often, as well, companies would not discuss corruption with their local teams and partners, assuming instead that it is understood that corruption is not acceptable. Sometimes this attitude is the result of fears that even raising the issue could expose problems that could disrupt the operations of their Russia business. Other times, it’s the result of a perception that, if no corruption issues have come up, then there must be none. Both of these attitudes are dangerous as they lead companies to ignore the question until it’s too late to prevent or remedy compliance violations.
Instead, EMEA executives should take a leading role in managing how corporate compliance standards are implemented and interpreted at the local level in Russia. They should act as intermediaries, providing training and leadership for their local team that addresses honestly the specific situations in which their business could run into corruption and how those should be handled by employees at all levels. They should select, train, and support country managers who have a full understanding of how to manage the business compliantly and can serve as role models for the rest of the Russia organization.
The perception that companies with no presence in the market are safe from corruption risk is inaccurate – in fact, companies may be held liable, for example, for their distributors’ corruption, especially after recent changes to Russia’s compliance laws. Instead of ignoring the issue until it comes up, companies should openly and frequently raise it with partners, providing them with training and support to ensure partners understand exactly what practices are acceptable. Due diligence, including explicit compliance provisions in contracts, and frequent monitoring are just a few of the other tools executives have in their disposal to ensure the compliance of their Russian partners.
With all the right practices in place, corruption shouldn’t be an impediment to further investing in the market and taking advantage of its growth potential.
For additional content on protecting your business in Russia from corruption, FSG clients can read a full report on how to manage compliance in Russia here.