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The leading indicators of corruption

Corruption is endemic in many areas of South African and African businesses and no stranger in other parts of the world either. Naturally, corruption impacts an organisation and can lead to legal ramifications, even though it seems money talks louder than laws (for those who have the money).

However, corruption in procurement and contractual obligations can also impact the organisation from a business continuity standpoint. The ongoing viability of a company can be adversely impacted by corrupt practices (unless you’re a state-owned company that can receive endless bailouts from the taxpayers). These impacts can range from preventing the business from being paid properly for its services or seeing it paying more for poor services or inferior products because someone was getting a bit ‘under the table’ as encouragement to leave a few terms out of the contract.

Leon Steyn.

Leon Steyn, CEO at Dante Deo, a boutique procurement and sourcing firm, believes it is critical to be able to identify potential corruption in business practices to avoid the above and other potential setbacks. Specifically, he says those involved in areas where deals are vetted, such as procurement or supply chain management, should be aware of the indicators and prepare themselves to act.

“In sourcing and procurement, we are often faced with many challenges from stakeholders, suppliers, governments and even our own aspirations and ambitions,” Steyn says. “Dealing with enormous sums of money and being dealmakers, we are expected to have integrity that is unwavering. But there are practices in almost all corporates and governments that serve as incubators for greed and corruption that could trap even the most ethical procurement professionals among us.

“More often than not, these practices are forced upon us by CEOs, CPOs, CFOs, heads of department, senior management and government officials; ironically, the exact leaders we look up to for guidance.”

Steyn highlights a few ‘indicators of corruption’ below and advises on what can be done when faced with them.

Direct instruction from an authorised person

The most common occurrence is when a senior instructs you to ignore a red flag or directly orders a procurement employee, for example, to award a contract to an unqualified company. Steyn states that this is where professionals need to stand by their values and oppose the corruption, while also admitting that people have been fired for such ‘offences’.

Most large organisations, however, have some mechanism to allow people to speak up, often anonymously, protecting the whistle-blowers from attacks. These mechanisms should also be used to report instances of workplace bullying, which can be related to corruption.

Bypassing of procedures and best practices

Procurement and other business processes are put in place for good reasons and these should be adhered to at all times. The PPE scandal at the start of the Covid lockdown is an example of when an emergency was used as an excuse to skip standard procedures, with the resulting corrupting and financial loss.

Steyn explains that there can be good reasons to bypass normal procedures, but that the bypass mechanisms must be part of the processes the organisation has set up for emergencies. Deviations to the norm need to be agreed to beforehand, as do the circumstances in which they can be applied.

Using an emergency as an excuse to throw all the checks and balances out the door is unacceptable and will almost always lead to mischief. Fast-tracking procurement does not mean bypassing all the rules, merely streamlining and speeding the process.

Creation of a crisis

Supply chains almost always have a crisis somewhere in the chain and it is easy to use this as an excuse to bypass normal regulations. In today’s world the supply chain is in crisis mode globally and there will be those looking to make a quick and corrupt buck that will use this as an excuse.

The corrupt process in this case will involve extra pressure to get a deal done or a contract signed within an extremely short period of time, leave little room to manoeuvre and will come with enormous pressure to get it done immediately. These schemes often involve leaving a problem to grow until it reaches emergency levels and then rushing to solve it or claiming that the budget will be spent on something else if everything isn’t approved immediately.

Specific suppliers that are pre-selected

This is a favourite in the private sector. In the public sector space, organisations have to issue open tenders unless there is a good reason not to and the contract has to have approval from the highest levels. This does not stop corruption but makes it less likely. In the private sector, however, open tenders are not a requirement and pressure can be put on staff to accept the deal.

These suspect arrangements often arrive as a pre-packaged deal that stipulate the organisation will agree to set terms and conditions with a particular supplier – naturally in favour of the supplier and not the customer. There is also a lot of pressure to simply sign off on the deal and the promoter of the deal will not be able to give a justifiable reason why this deal needs to be approved – another red flag.

Steyn says the employee responsible for approving the arrangement must simply dig their heals in and do their job properly and professionally. Their experience will tell them that something is fishy and if their questions can’t be answered they need to stand firm.

Pressure, pressure, pressure

As criminal minds try to push through their latest corrupt schemes, employees ‘in the way’ will experience pressure in various forms. The first of these is usually time constraints, saying everything needs to be finalised in a very short time that they know is not enough for all the checks to be done.

An alternative is safety. The employee might hear that if this is not approved people could be put at risk because they don’t have the right protective gear (or something like that). While the arguments sound valid (and sometimes are), the emergency is usually created specifically to prevent anyone from checking the details too closely.

And of course, Steyn notes that threats are also part of the pressure. Employees may be threatened with suspension or even dismissal; in some instances he has even experienced threats of violence.

Those people trying to be professional and do a good job in supply chain and procurement environments need to remain vigilant of the above tactics and others that can be used to force the acceptance of a corrupt contract or service. They need to stand firm and use whistle-blower hotlines if the normal channels are blocked, or even revert to a civil organisation such as Freedom Under Law (www.freedomunderlaw.org), OUTA’s corruption reporting mechanism (www.outa.co.za/whistleblowing) or those directly involved in their industry sector.

Standing up to pressure from criminals is not easy, but it is only by individuals taking a stand that we can hope to contain corruption and ensure an even playing field for everyone. In addition, stopping corruption and ensuring every contract adheres to the organisation’s standards will ultimately save money and benefit the organisation in the long run.

Find out more about Dante Deo at www.dantedeo.co.za

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