Collective Wisdom – The role of industry forums in combating corruption

In 2004, James Surowiecki released his book “The Wisdom of Crowds: Why the Many Are Smarter Than the Few and How Collective Wisdom Shapes Business, Economies, Societies and Nations” which highlighted the importance of collective decision making and how decisions taken by a group are often better than any single member.

How is this relevant for the Anti-Bribery and Anti-Corruption initiatives of organizations? In an environment like India, which is ranked 85th in the Transparency International’s Corruption Perception Index, bribery and corruption is perceived to be an unavoidable risk. Multinational corporations (MNCs) working here  are faced with the dilemma of how to tackle this issue and most of them have experienced that they lose out on business to local companies only because they decided not to pay bribes.

But what if companies decide to tackle the issue collectively, rather than pondering over it individually? If a single entity stops making improper payments, the others gain. But if all organizations in the market agree to abide by that decision, everyone stands to gain.

Take the example of anti-counterfeiting initiatives by consumer product enterprises in India. The issue was pervasive across the industry and consequentially, all companies jointly decided to take serious steps to address the issue. The concept of ‘competition’ was put on a back burner and they joined hands to weed out the counterfeiters who were undercutting their business.

Similarly, MNCs are forming industry groups to manage the issue of bribery and corruption. These forums act as an enabler to understand the different corruption risks which can be faced by organizations. In addition, they are also a good platform to debate about developing internal controls to detect and mitigate instances which could lead to non-compliance. Cross sharing experiences becomes beneficial as risks are understood better and companies can take informed decisions. Legal counsels, consultants and experts are also roped in to contribute to these discussions.

So how are these forums advantageous?

  1. Better understanding of corruption risks for enterprises operating in the country
  2. Helps in designing robust compliance programs to detect and mitigate occurrence of non-compliance
  3. Collective decisions aid in managing corruption risks to ensure fair competition
  4. Increased margins due to reduction in cost arising due to potential improper payments

Taking a page out of the anti-counterfeiting initiative, businesses need to look at the bigger picture and collaborate with ‘competitors’. These forums provide a suitable platform to engage in multilateral discussions and contribute to a common cause.

But one question can nag local entities to join hands with MNCs – why will it impact me?  Especially so they are not subject to the regulations of the USA or UK.

The answer to that is margins! Any improper payment made to any official is in the end a cost to the company and considerably affects its margins. Industries that have taken such initiatives have seen that even local organizations have started being part of these forums and have extended their cooperation. One of the major factors affecting that decision were the lucratively high margins. Apart from margins, opportunities of mergers or joint ventures with MNCs have also influenced their decision in joining these initiatives.

To summarize, companies need to realize the power of Collective Wisdom – harness it for collective good and a clean business environment.

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