Flevy Blog is an online business magazine covering Business Strategies, Business Theories, & Business Stories.

How to Counter Corporate Corruption and Fraud

corruptionExpanding into new markets presents lucrative opportunities, as well as risks.

Potential threats in new territories include corporate corruption, malpractices, and fraud, which most firms have to face.  Corruption and fraud cover a wide array of situations, but it is the unobtrusive yet more prevalent forms of fraud and corruption that create the biggest risks for organizations.

Corporate corruption and fraud can be characterized into 4 distinct categories.  Understanding these 4 categories of corrupt practices prepares the executives to efficiently deal with the troubles they are likely to encounter in their careers.

  1. Bribery
  2. Grease Payments
  3. Extortion
  4. Employee Fraud



Most corporations in new markets face problems when their people are asked to make payments—by the local government or political figures—in order to achieve a business contract, acquire regulatory approval of a product, reduce taxes, or avoid customs duties.  It is illegal in ethical companies to pay bribes by both the local as well as home country laws.  Managers hardly ever make payments openly.  This is mostly done through agents or dealers, utilizing unaccounted funds, funding foreign trips, giving gifts, and making donations to nongovernmental organizations as advised by the crooked officials.

Grease Payments

Grease payments are demanded for doing routine transactions faster.  Most executives encounter requests for grease payment by both government officials as well as by private sector employees.  In some regions, even commencement of a business is littered with hurdles at each step where executives are often pressurized to pay grease payments or suffer undue delays in processing simple tasks.


In some countries with ineffective rule of law, dishonest officials demand money from businesses by coercing their executives or threating their operations.  Executives new to such places typically fall prey to these coercers and succumb to make payments.  Such threats and intimidation are often real based on the coercers’ reputation and past actions.

Employee Fraud

Another common menace in corporate organization is the involvement of senior executives in fraudulent activities, such as receiving kickbacks and commissions.  Many a recent surveys and studies on global fraud have revealed the involvement of senior officials of multinational organizations in the developing markets.  Greed is the major factor that tempts senior executives to undertake such fraudulent activities—such as faking the books, stuffing the channel with stocks, and forging parallel agreements with customers.

Preventing Corruption and Fraud 

It is typically the materialistic politicians and dishonest public officials that are held responsible.  However, corruption in most circumstances arises out of reciprocal obligation.  The leaders or executives who succumb to the demands of the crooked officials or politicians are equally responsible for the act.

To avoid the threats of denting their reputation, organizations must ensure to make dealing with corruption a fundamental organizational capability.  A simple way to do it is to devise something beyond policies and controls—such as building a culture of ethics and compliance, or operate ethically in any market around the globe.

It is critical for the organizations to create internal capabilities to resist corruption and inculcate behaviors and mindsets persistent with strong morals to endure such potential threats as they occur.

The 4 principles to combat Corporate Corruption are of great assistance to executives in this regard:

  1. Have Basic Controls in Place
  2. Invest in Core Functions
  3. Have Strong Local Leadership
  4. Tough It Out

Have Basic Controls in Place

Combating corruption becomes easier by establishing appropriate policies, rules, codes, and compliance measures.  This starts with assigning appropriate budgets to conduct audits and compliance reviews, training teams to abide by anti-bribery and corrupt practices laws, taking action against corrupt employees, and defining a formal code of conduct for every employee.  Effective processes for discounts, gifts, travel, and charitable contributions be laid out; and there should be proper communication of all these policies, codes, and rules to all stakeholders including the customers.  Likewise, proper fraud investigation processes should be formulated, which should be quick, focused, rational, and impartial.

Interested in knowing more about how to combat malpractices in your organization?  You can learn more and download an editable PowerPoint about Corporate Corruption and Fraud here on the Flevy documents marketplace.

Are you a management consultant?

You can download this and hundreds of other consulting frameworks and consulting training guides from the FlevyPro library.

About Mark Bridges

Mark Bridges is a Senior Director of Strategy at Flevy, where he leads various Social Media Marketing initiatives for Flevy, including Inbound Marketing, Lead Generation, and Community Management. Flevy is a marketplace for business documents--specifically, documents used by folks who work in a business function (e.g. Marketing, Corporate Finance, IT, etc.). These documents can range from Excel Financial Models to customizable PowerPoint Templates to "How-To"​ Business Frameworks. Prior to Flevy, Mark worked as an Associate at McKinsey & Co. and holds an MBA from the Booth School of Business at the University of Chicago. You can connect with Mark on LinkedIn here.

, , , ,

Complimentary Business Training Guides

Many companies develop robust strategies, but struggle with operationalizing their strategies into implementable steps. This presentation from flevy introduces 12 powerful business frameworks spanning both Strategy Development and Strategy Execution. [Learn more]   This whitepaper authored by McKinsey Communications specialist teaches us the 4 Cs of Communication Review, so you can find and fix errors in your Communication prior to sending it out. It addresses the most critical elements of Communication across all formats. [Learn more]
We've developed a very comprehensive collection of Strategy & Transformation PowerPoint templates for you to use in your own business presentations, spanning topics from Growth Strategy to Brand Development to Innovation to Customer Experience to Strategic Management. [Learn more]   We have compiled a collection of 10 Lean Six Sigma templates (Excel) and Operational Excellence guides (PowerPoint) by a multitude of LSS experts. These tools cover topics including 8 Disciplines (8D), 5 Why's, 7 Wastes, Value Stream Mapping (VSM), and DMAIC. [Learn more]
Recent Articles by Corporate Function






The Flevy Business Blog (http://flevy.com/blog) is a leading source of information on business strategies, business theories, and business stories. Most articles have been contributed for management consultants and industry executives with over 20 years of experience. If you would like to contribute an article, please email our editor David Tang at [email protected].

Flevy (http://flevy.com) is the marketplace for premium business documents, such as management frameworks, presentation templates, and financial models. Our documents are of the same caliber produced by top tier consulting firms, like McKinsey, Bain, Accenture, BCG, and Deloitte. Learn more about Flevy here.

Connect with Flevy:


About Flevy.com   /   Terms   /   Privacy Policy
© 2019. Flevy LLC. All Rights Reserved.