Tag: Transparency International

OM in the News: Corruption’s Impact on Operations

Transparency International, which compiles the annual Corruption Perceptions Index (which we publish as Figure 8.2), found that 47 countries out of the 180 it surveyed had their lowest score last year since it started using its current methodology for its global ranking. (See transparency.org/en/news/, Feb. 11. 2025).It said of its 2024 survey that “global corruption levels remain alarmingly high, with efforts to reduce them faltering.”

The group also pointed to worldwide risks from corruption to efforts to combat climate change. It said that a lack of transparency and accountability mechanisms increases the risk of climate funds being embezzled or misused, while “undue influence,” often from the private sector, obstructs the approval of ambitious policies. The organization measures the perception of public sector corruption according to 13 data sources, including the World Bank, the World Economic Forum and private risk and consulting companies. It ranks 180 countries and territories on a scale from a “highly corrupt” 0 to a “very clean” 100.

The global average remained unchanged from 2023 at 43, with more than two-thirds of countries scoring under 50. Denmark held on to first place with 90 points, followed by Finland with 88 and Singapore with 84. New Zealand dropped from third to fourth. The U.S. slid from 69 points to 65 and from 24th place to 28th

South Sudan slid to the bottom of the index with just 8 points, displacing Somalia although the latter country’s score dropped to 9. They were followed by Venezuela with 10 and Syria with 12. In the Middle East and North Africa, the situation of anti-corruption efforts “remains bleak” as political leaders exert near-absolute control while benefiting from wealth and clamping down on dissent. But it said that “unforeseen opportunities are also emerging,” for example in the wake of the fall of President Assad’s government in Syria. Sub-Saharan Africa had the lowest average score of any region, at 33.

In Asia and the Pacific, governments “are still failing to deliver on anti-corruption pledges,” Transparency International said.

Classroom discussion questions:

  1. Why is this annual index useful in OM?
  2. Explore the variables used in creating the ranking.

OM in the News: Corruption and Global Operations Management

In Chapter 8 (Location Strategies), we write: “One of the greatest challenges in a global operations decision is dealing with another country’s culture. Bribery and corruption create substantial economic inefficiency.” Table 8.2 (page 339) ranks corruption based on Transparency International’s annual survey, which has just been updated for 2022. The news is not encouraging.

The 2022 Corruption Perceptions Index (CPI)  shows that most of the world continues to fail to fight corruption: 95% of countries have made little to no progress since 2017. According to the Global Peace Index, the world continues to become a less peaceful place. There is a clear connection between this violence and corruption, with countries that score lowest in this index also scoring very low on the CPI. Governments hampered by corruption lack the capacity to protect the people, while public discontent is more likely to turn into violence. This vicious cycle is impacting countries everywhere from South Sudan (with a score of 13 (on a 0-100 scale, with 0 being highly corrupt and 100 being very clean) to Brazil (score of 38).

The head of Transparency International adds: “Corruption has made our world a more dangerous place. As governments have collectively failed to make progress against it, they fuel the current rise in violence and conflict – and endanger people everywhere. The only way out is for states to do the hard work, rooting out corruption at all levels to ensure governments work for all people.”

The CPI ranks 180 countries and territories by their perceived levels of public corruption. The CPI global average remains unchanged at 43 for the eleventh year in a row, and more than 2/3 of countries have a serious problem with corruption, scoring below 50.

  • Denmark (90) tops the index this year, with Finland and New Zealand following closely, both at 87. Strong democratic institutions and regard for human rights also make these countries some of the most peaceful in the world.
  • South Sudan (13), Syria (13) and Somalia (12), all of which are embroiled in protracted conflict, remain at the bottom of the CPI.
  • 26 countries – among them the United Kingdom (73), Qatar (58) and Guatemala (24) – are all at historic lows this year.

Corruption, conflict and security are profoundly intertwined. The misuse, embezzlement or theft of public funds can deprive the very institutions in charge of protecting citizens, enforcing the law, and guarding the peace of the resources they need.

Classroom discussion questions:

  1. Why is this a Chapter 8 topic?
  2. What world events have impacted corruption levels this past year?

OM in the News: The Financial Secrecy Index

The latest Financial Secrecy Index (published by Transparency International on Jan. 30, 2018) ranks countries according to their secrecy and the scale of their offshore financial activities. Politically neutral, it is a potential location analysis tool for understanding global financial secrecy, secrecy jurisdictions, and illicit financial flows or capital flight.

From $21 to $32 trillion of private financial wealth is located, untaxed or lightly taxed, in secrecy jurisdictions (better known as “tax havens”) around the world. These countries use secrecy to attract illegitimate financial flows. Illicit cross-border financial flows are estimated at $1-1.6 trillion per year: dwarfing the $135 billion in global foreign aid.

Since the 1970s African countries alone have lost over $1 trillion in capital flight, while combined external debts are less than $200 billion. So Africa is a major net creditor to the world – but its assets are in the hands of a wealthy élite, protected by offshore secrecy. Yet all rich countries suffer too. For example, Greece, Italy and Portugal have been brought to their knees partly by decades of tax evasion and state looting via offshore secrecy.

In identifying the most important providers of international financial secrecy, the Financial Secrecy Index (FSI) reveals that traditional stereotypes of tax havens are misconceived. The most important providers of financial secrecy harboring looted assets are mostly not small, palm-fringed islands as many suppose, but some of the world’s biggest and wealthiest OECD countries. The top 7 FSI offenders ranked are: Switzerland, U.S., Cayman Islands, Hong Kong, Singapore, Luxembourg, and Germany. Click here for the full 2018 rankings of 112 countries.

The only realistic way to address these problems is by directly confronting offshore secrecy and the global infrastructure that creates it. A first step is to identify as accurately as possible the countries that make it their business to provide offshore secrecy. This is what the FSI does.

Classroom discussion questions:

  1. How does FSI differ from the two location analysis index tools in Tables 8.1 and 8.2?
  2. Explain the meaning and purpose of FSI.