By Daniel Hunter

The Fraud Investigation & Dispute Services team at Ernst & Young has today (Tuesday) released research revealing that nearly half (48%) of British firms are failing to vet their suppliers for compliance with the UK Bribery Act, and that only 6% would re-tender if they discovered their suppliers were not compliant.

The study polled procurement managers and directors from a wide range of firms across the UK. The study found that while midmarket firms are often less likely to have robust processes and systems in place to counter bribery risk, companies at both ends of the spectrum appeared complacent when it came to vetting their suppliers for compliance with the Act.

Ernst & Young’s study found that even though 60% of firms with a turnover of £5m to £50m currently vet their suppliers to assess whether their business practices comply with UK Bribery Act, 16% of these midmarket firms would ‘do nothing’ if their suppliers fail to comply. Moreover, amongst those firms that do not currently vet their suppliers, 60% reported that they are not planning to implement any anti-bribery programmes in the future.

The research also revealed that only 40% of larger firms (those with a turnover of more than £50 million) would remove suppliers from their supply chain if they fail to comply with the Act.

“Following recent concerns over food contamination, there has been much focus on supply chains and how much companies know about suppliers and agents acting on their behalf," John Smart, Partner at Ernst & Young said.

"In cases where bribery and corruption are discovered, the consequences for companies under the law may be serious. It’s worrying to see that businesses are failing to make sure that their suppliers are complying with the UK Bribery Act, especially as the Act came into effect over a year and a half ago.

“Many directors are still unaware that they can be held personally accountable for any failings in this area. This means that senior managers and directors risk significant prison terms and large fines for non-compliance in which they are personally involved, even if the breach is caused by the actions of a third-party supplier.”

Additional findings from the research include:

· 24% of firms believe that taking on a new supplier will incur the most risk to supply chains;
· Only 48% of firms carry out third- party due diligence in their supply chain;
· 12% of firms would ‘do nothing’ if they found out that their suppliers failed to comply with the Act;
· Less than half (44%) of firms with a turnover from £5m to £50m carry out third party due diligence

“Many businesses are underestimating the reach of the UK Bribery Act. Our findings reveal that there is still a lot of work to be done in this area to ensure that directors and senior managers not only realise the importance of complying with the Act, but also are willing to examine whether their entire supply chain is meeting these same standards," John Smart concludes.

"Anyone who thinks that the issue of third-party compliance can simply be glossed over is making a grave mistake, as failures in this area can lead to significant fines and penalties for all involved.”

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