Research Question

  1. How can multinational companies better assess their risk of business bribery and corruption in their operations overseas?

Corruption is a major problem that can inhibit global business investment, especially in emerging markets; however, businesses operating overseas have inadequate tools for assessing business bribery risk and their potential risk of violating various anti-corruption laws. This report introduces a new index, the TRACE Matrix, for business bribery risk assessment that we believe has advantages over existing alternatives.

The TRACE Matrix provides a quick and useful guide for businesses operating overseas that is based on a conceptual model of bribery risk and supported by data specific to firms. The objective of this index is to help firms assess the propensity for government bribery and its associated business risk and to provide data to inform compliance processes. We have developed a business bribery risk methodology using existing, publicly available cross-country data about risk factors, drawing on diverse data sources focused on business information. We have aggregated the data to provide a composite score for each country based on distinct categories of risk, much like a health index score that combines the key factors important to health (e.g., blood pressure, heart rate). Although countries are ranked by their composite scores, it is also possible to view the results for the different factors included in the composite score and identify the key drivers of that score. This allows firms to adjust their risk assessment and compliance practices to better suit country-specific conditions.

Key Findings

Multinational companies often have inadequate tools for judging business bribery risk; they frequently rely on aggregate, general corruption indexes that may not provide sound information on which to base decisions.

  • The lack of good information on bribery risk can lead to less-than-adequate compliance programs, exposing firms to the potential risk of violating anti-corruption laws, or to an overly aggressive and costly approach.

Business leaders and other stakeholders, as well as the literature, identified specific information needed to provide a balanced and objective view of business bribery risk.

  • The types of information required included (1) difficulty of doing business; (2) need for interactions with government; (3) the relevant anti-bribery laws and regulations; (4) information concerning enforcement of domestic and international anti-bribery laws and regulations; (5) a measure of government transparency and quality, including budgetary transparency; (6) information about a government's civil service quality and management; and (7) civil society oversight, including the role of the press and media.

Table of Contents

  • Chapter One

    Introduction

  • Chapter Two

    Development of the Business Bribery Risk Index

  • Chapter Three

    Results

  • Chapter Four

    Conclusion

  • Appendix A

    Stakeholder Interviews

  • Appendix B

    Outline of Domains, Subdomains, and Data Sources

  • Appendix C

    Statistical Model Methodology

  • Appendix D

    Results

  • Appendix E

    List of Reviewed Data Sources

  • Appendix F

    Country TRACE Rankings

Research conducted by

The research described in this report was sponsored by TRACE International and was conducted by the RAND Institute for Civil Justice, a part of the Justice Policy Program within RAND Social and Economic Well-Being.

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