A recent survey undertaken by the Political and Economic Risks Consultancy ranked Hong Kong as the third least corrupt place in Asia.

The survey, which interviewed 1,000 foreign businessmen working in Asia, illustrates the territory's openness and adherence to sound business principles. But it does not mean that the territory is devoid of corruption.

During the past decade, more than half of the corruption complaints received by the Independent Commission Against Corruption (ICAC) involved the private sector, and the trend appears to be on the rise.

The most common cases involve soliciting illegal commission, splitting inflated procurement prices, disclosing privileged information for personal gain, theft of company property, falsifying accounting records and abuse of authority.

All these problems illustrate the need for private companies to be more wary about the way they go about their businesses. In many cases, it also shows there is a need for effective internal systems and controls.

To encourage and help private companies put in place internal controls and safeguards against corruption and malpractice, the Advisory Services Group of the Corruption Prevention Department of the ICAC provides tailor-made corruption prevention advice to private companies.

The following three cases illustrate clearly just how easy it is for companies to unwittingly become "victims of corruption."

For quality assurance, an international buying office has the practice of placing repeat orders from buyers with the previous supplier. A merchandiser of the Hong Kong office took advantage of this practice by soliciting a discount from the supplier in return for placing the order with him, but he billed the buyer the same unit price as the first order and pocketed the difference.

The company was advised to establish procurement guidelines specifying the minimum number of quotations to be obtained for different values and categories of products available in the market. As prices may change over time, the company was also advised to create a timetable specifying the period that the prices would be valid for. The company was further advised to establish a regular liaison channel with its suppliers to maintain a good business relationship and uncover any abnormal activities of its staff.

In administering a tender exercise for the supply of frozen food, the chef of a restaurant, in return for monetary gains, disclosed the tender prices of other tenderers to one of the bidders.

The company was advised to step up its tender collection procedures to ensure the security and confidentiality of the tenders received. It was also suggested that tenders received should be opened in one go by a tender opening team comprising of at least two persons. In the selection of tenders, they should be systematically assessed to ensure value for money as well as avoid favouritism. The company was also advised to draw up a code of conduct for compliance by staff in which the company's policy on acceptance of advantages and confidentiality of information were clearly stated.

A purchasing manager of a department store, in collusion with a warehouse keeper, falsified stock records to steal valuable items.

The company was advised to set up a proper inventory control system covering receipt of goods and disposal of old stock and damaged goods. The company was also advised to conduct random stock checks by an independent third party in addition to routine stocktakes by the warehouse staff.

The Advisory Services Group has extensive experience in providing corruption prevention advice on system controls. Since its establishment in 1985, the group has advised more than 3,000 companies, covering a variety of businesses. The advice given by the group is tailor-made, free of charge and in strict confidence. The company also has full discretion to decide whether or not to act on the group's advice.