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How to Protect Your Company From Bribery and Corruption in the Construction Industry Part 2

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The engineering and construction industry has the highest prevalence of bribery and corruption than any other industry on the planet. While corruption can take many forms, including asset misappropriation, fraud, and cybercrime, they all have one thing in common: They can result in the downfall of even the most successful construction company. 

In part one of this two-part series, we discussed the prevalence and forms of corruption in this industry, below, we will continue to discuss the risks that construction companies are facing and how companies can protect themselves from the widespread corruption that is plaguing the industry. To ensure that your company is doing everything in its power to fight bribery and corruption, consult with the knowledgeable Florida contractor lawyers from Cotney Construction Law. 

Operating in High-Risk Markets

As reported by PWC in their analysis of their Global Economic Crime Survey, nearly half of the engineering and construction executives surveyed stated that their companies operate in high-risk markets. Due to the global nature of the construction industry, many of these companies risked experiencing corruption in one form or another in order to grow. 

Of the respondents who pursued opportunities in high-risk markets, nearly half stated that they had “to adapt their business strategies.” These adaptations included such measures as performing due diligence procedures, adding anti-corruption clauses to contracts, and providing additional employee training. However, these measures were not enough. Nearly half of the respondents stated that they had to abandon a business opportunity due to the risk of corruption. If you are ever faced with having to abandon an opportunity because you are afraid of encountering bribery or corruption, consult with a Florida contractor lawyer to ensure that all measures are taken to protect your company. 

What Anti-Corruption Measures Are Effective? 

In the construction industry, whistle-blowing systems are nearly as effective as corporate controls at detecting economic crime. This is in stark contrast to most other industries. Remember, it is imperative that your company does not retaliate against a whistleblower. Retaliation could result in your company being ordered by the Occupational Safety and Health Administration (OSHA) to pay back wages and damages. 

Effective corporate control measures include suspicious transaction reporting, internal audits, and fraud risk management. However, few of the engineering and construction respondents stated that their companies performed annual fraud risk assessments. Furthermore, over a third of respondents stated that their companies didn’t perform fraud risk assessments at all. Most respondents stated that they fail to perform fraud risk assessments because they simply don’t know what fraud risk assessment is. Consult with a Florida contractor lawyer from Cotney Construction Law if you have any questions regarding fraud risk assessment and the laws, standards, and regulations related to fraud. 

Fighting Internal Perpetrators 

The vast majority of economic crimes experienced by engineering and construction companies resulted from internal perpetrators. A whopping 70 percent of economic crimes came from employees within their own companies. For comparison, the average across all industries is 56 percent. While this statistic is disheartening, your company can take steps to effectively mitigate instances of bribery and corruption from within. The same can’t be said for external sources of corruption. These steps include the previously mentioned corporate controls, including IT security, physical security, and employee rotation. 

However, corruption more often stems from those in management roles. 28 percent of fraud cases were committed by middle management members, and 52 percent were committed by senior management members. This prevalence is most likely due to the fact that members of senior management have the power to influence bids and manipulate contracts. This means that it’s vital for construction companies to implement certain controls, such as hierarchy of authority and separation of duties, to prevent incidents of bribery and corruption. 

What More Can Construction Companies Do to Fight Corruption? 

If you’ve discovered that an internal perpetrator has been caught up in fraud, bribery, or corruption, your company should dismiss this employee and report them to law enforcement and the proper regulatory authorities. Clear, quick action will help preserve your company’s reputation. Furthermore, the best thing your company can do when faced with bribery and corruption, whether from an internal or external source, is to consult a Florida construction attorney

The stakes are simply too high for your company to try and ignore instances of bribery and corruption. The last thing you want is for your company to be caught up in a high-profile corruption case. Not only would your company’s reputation be permanently damaged (assuming your company survives), but it can also be fined millions of dollars. To ensure that your company is doing everything in its power to fight and protect itself from bribery and corruption, partner with the team of Florida construction attorneys from Cotney Construction Law. 

If you would like to speak with one of our Florida construction attorneys, please contact us today.

Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.