Corruption Challenges Index 2019 Corruption danger spots for business in 2019
The world’s most and least challenging places for foreign investors in relation to corruption levels
Welcome to the 2019 edition of Risk Advisory’s Corruption Challenges Index. As with the 2017 and 2018 surveys, these findings are based on our experience of carrying out in-depth investigations and due diligence around the world during the previous year. Our findings are based on many factors such as levels of FCPA enforcement action and local industry risks, as well as how information flows affect a company’s ability to understand who exactly it’s dealing with.
Businesses need to be aware of which countries have a significant risk of corruption. The Corruption Challenges Index is an essential guide for businesses conducting work globally, ensuring awareness of where corruption challenges lie and why you should conduct thorough due diligence before investing in such a country.
Key features:
- Three interactive maps – revealing the highest and lowest threats posed (corruption threat), the availability of information (opacity) and the overall challenge of doing business in each country (Corruption Challenge Index score)
- Top 10 league tables – indicating the most and least challenging countries to carry out business
- Top 3 sectors – exposed to corruption in each region and globally
- Regional viewpoints – interpretation from our global team of experts, highlighting trends and themes
- Construction and development, infrastructure, and oil and gas emerge as the most challenging industry sectors from a corruption point of view globally
- Turkmenistan remains the country where businesses face the biggest corruption challenges, followed by Libya and then Somalia
- Europe generally performs well in the Index and dominates the list of least challenging countries. It also has the lowest average corruption challenge score
- Africa generally performs poorly in the Index with the highest average corruption challenge score. It also claims six out of ten countries where the threat levels are highest for unstable regimes and the likelihood of encountering corruption
- The ability to source reliable data is at its worst in Turkmenistan, Libya and Somalia – marked as Opacity scores on the maps.
Methodology
The Corruption Challenges Index is compiled by due diligence experts from Risk Advisory’s seven regional business intelligence teams, with country risk scoring from our political and security risk focused Intelligence & Analysis team.
The index assesses corruption threat, regime instability and accessibility of information in 187 countries to arrive at a ‘Corruption Challenge’ score, and a resulting ‘Most Challenging Jurisdiction’ ranking.
In countries where the threat of corruption is elevated, integrity due diligence performs an essential risk management function. But when information is scarce or unreliable, due diligence requires specialist knowledge and research skills to undertake. The most challenging countries are those where threat is high and due diligence difficult. The index is designed to quantify this nexus.
Our experts were asked to grade each country on the likelihood of two scenarios; 1) foreign investors encountering corruption in seeking a significant government contract, licence or permit, and 2) a business operating locally enduring small scale official corruption to undertake day-to-day operations.
These scores were added to a regime stability score to arrive at a Corruption Threat rating (T). This is offset against an Opacity score (O), which is based on our experts’ assessments of the comprehensiveness and reliability of public information, media openness, the freedom of human sources to converse and particular linguistic barriers such as transliteration or complex translation. We have also added new subsets of variables, including how accessible certain public records are (such as corporate filings, litigation filings, and media reporting).
The Corruption Challenge score (C) subtracts Opacity (O) from Corruption Threat (T);
C = T – O
The index’s most challenging countries are those assessed to have a high risk of both petty and grand corruption, less stable regimes and low availability of public information and business intelligence.
In addition to building the index we also asked our analysts to consider the three business sectors that are most exposed to corruption in each country. We were then able to produce regional and global frequency analyses based on this data.
Working example below:
From our assessment, India’s Corruption Challenge score (C) is relatively low. Although the Corruption Threat (T) level is comparatively high, source information is readily available and of a good quality (O); hence offsets India’s overall Corruption Challenge score (C) which is somewhat low, and therefore it is a country which is relatively straightforward to do business in.’
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