Treasurers Need to Get out More

When treasury and finance professionals have an insular world view, they may be setting their companies up for unpleasant surprises.

 

For treasurers and other finance managers who’ve spent their careers in the United States, bribery and corruption may seem far-removed from reality. But for those who are responsible for financial management in other parts of the world, an insular attitude may be setting them—and their companies—up for some unpleasant surprises. A recent global study by Ernst & Young titled “Navigating today’s complex business risks: Europe, Middle East, India, and Africa Fraud Survey 2013” reveals that some activities which seem taboo to most businesspeople in the United States are not as uncommon in the developing world.

Bribery and corruption are also more widespread in the developing world than a U.S.-based management team might expect. In the Ernst & Young survey, 57 percent of respondents in the developing world said that bribery or corrupt practices happen widely in business in their country.

“What’s interesting is that in a lot of cases, a large percentage felt that bribery and corruption was widespread in their country, but a smaller percentage felt it was applicable to the sector that their business is in,” Loughman says (see figure 3). “Clearly, that can’t hold water. If two-thirds of people think there’s a problem in their country but only 20 percent think it occurs in their industry, finance managers with operations in that country should make sure their controls are attuned to that sort of thing.”

Loughman offers several suggestions for mitigating potential problems. First, treasury and finance can work with internal audit to rethink controls in parts of the world that may need deeper investigation, perhaps on a rotational basis. “As companies grow in developing markets, they need to allow their checks and balances to flex accordingly,” he says. “They don’t have to go chasing everything down with a microscope, but an internal audit review in this part of the world shouldn’t look the same as it looks for the operation in Cleveland. Companies really need to make sure they’re touching things that they would take for granted in the U.S.”

Loughman PQ2

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