Association can arise from friendship, relationship, connection or involvement with a particular individual, group, club, fraternity, union, business, company or organisation.

Each of these bodies have their own reputation, ethics, culture, values or ethos which manifest in their image, conduct, integrity, behaviour, business dealings, actions, branding, speech, messages and general communication.

The term “reputation” has become a buzzword or umbrella term to best describe a host of factors understood to contribute to an organisation’s standing both internally and externally. Organisational image is regarded as an important contributor to the overall reputation of any business or institution. Often organisations will spend vast amounts of money employing either internal or external agents in order to manage their reputation. See Newsclip article at

Association “risk” has really come to the fore following the rapid and widespread fall out of companies and individuals associated directly and indirectly with the Guptas and their various business operations, after the release of the Gupta e mail leaks and the allegations of state capture and widespread corruption.

South Africa’s state is corrupt and albeit that “captured” makes it sound as if this occurred against its will, it has found a multitude of willing partners in the private sector. This has included local and international companies, banks, auditors, public relations and communication companies, financial intermediaries, trade unions, lawyers, advisors, media and newspapers, travel agents, hotel operators, the press and media, parastatal organisations, governmental departments, government ministers, senior public servants and the revenue authorities.

The fall out continues as more and more parties get named and shamed. Some of the international names that have been drawn into the expose are:

SAP, Software AG, Mckinseys, KPMG, Bank Baroda, Patanjali Ayurved Limited, China Communication Construction Group, China South Rail, Glencore, Neotel, Bell Pottinger and Liebherr.

The speed and demise of some organisations involved in this association has been nothing short of spectacular. The prime example has been Bell Pottinger who has gone from pleading ignorance and defending its actions three months ago to filing for administration this past week. The local branch of KPMG has also seen massive turmoil in a very short period of time from defending its relationship with the Guptas to the resignation and firing of the Chairman, Country Head and partners, the retraction of their SARS “rogue unit” report and the loss of some major audits as a result, with more likely to follow suit. Their professional local accreditations are under scrutiny and some association memberships have been suspended.

In an age of electronic and social media and investigative journalists, these negative messages and signals travel fast and wide. Adverse publicity of any nature can have an immediate impact and draw extensive reaction. The days of hiding behind confidentiality are over, and there is no longer room for a lack of governance and protection for money laundering and corrupt individuals in the global financial system. Whistleblowers are a reality, again aided by social and electronic media. Comprehensive transactional audit and money trails, intensive financial reporting and over-sight are now a global financial industry requirement and norm.

The number of individuals who have now lost their jobs and had their reputations destroyed by virtue of the association with the Guptas, increases by the day as internal investigations by international parent companies are concluded. Certain implicated local individuals have been required to relinquish board positions as a result. Suppliers to and the employees of local Gupta companies’ jobs are now under threat as a result of these companies not being able to conduct banking accounts and hence pay creditors or salaries.

On a national level, the country and its citizens have been the biggest losers as a result of this breakdown in governance at all levels, resulting in a ratings downgrade, loss of opportunities, country risk premium having increased, job losses, political fall-out, business failures and the loss of confidence by both local and foreign investors.

At the same time charges of fraud, racketeering, collusion, aiding in money laundering and tax evasion are being laid against various parties such as KPMG and Mckinseys by opposition political parties and chapter nine organisations such as Corruption Watch.

There have been a number of highly publicised global incidents of corruption between politicians and big business which have resulted in major reputational damage, fines and shareholder reaction.  Recent incidents include:

  • Samsung - which saw the heirLee Jae-yong  being jailed for 5 years and the former Korean President Park Guen-hye being  impeached in a  bribery and cronyism scandal.
  • Kaspersky - the US Government remains concerned about the possible ties between certainKaspersky officials and Russian intelligence and other government
  • Petrobras - the Brazilian state controlled petrol company, high level business people and Brazilian politicians, including a call to impeach the President.
  • Brazil is bracing for a fresh bout of political turmoil after the president,Michel Temer, became the country’s first sitting head of state to be formally charged with a crime, less than a year after taking power. The deeply unpopular leader was formally accused of corruption by the attorney general and could now face a vote on whether he should be tried by the supreme court for taking bribes. It is alleged that he took millions of dollars in bribes from meat-packing giant JBS. These allegations followed the release of a secret recording of a late-night conversation earlier this year between Temer and the JBS executive Joesley Batista, in which the president appeared to endorse hush money payoffs to former house speaker Eduardo Cunha, a member of Temer’s party who is serving a 15-year sentence for corruption. The attorney general said the president had “fooled Brazilian citizens” and compromised the image of the country.JBS, the world's largest meat company, which has been mired in multiple corruption scandals in Brazil, has agreed to pay a record fine of $5.4 bn. Regulators have accused processors big and small of bribing government meat inspectors to ignore food safety problems. The company also received suspect loans from the National Bank for Economic and Social Development -- Brazil’s federal bank, which enabled JBS to expand rapidly worldwide over the last decade. Authorities say the bank played favorites with JBS, giving the company favorable loan terms starting in June 2007 to acquire other meat companies around the world.
  • Italian Banks - a number of banks and officials have been investigated over toxic loans as a result of corruption, political kickbacks, fraud and abuse of office. These have involved fraudulent bankruptcy charges and loans offered by the banks which were never paid back and which left retail bondholders holding virtually worthless bonds.

In the same way, we can learn from the local NET1/ social welfare tender debacle how company shareholders have been forced to distance themselves from the lack of governance and morality at the company for fear of association risk with a now tainted organization, seen to be capitalising on the poor.

Once a party is tainted and its reputation tarnished, all associated parties become vulnerable as a result of their level and extent of involvement with that party. Parties intimately involved or who have benefited directly as a result of the association, are immediately drawn into the firing line.

The level of due diligence and background vetting required before entering into a business or financially beneficial arrangement with an unknown party requires good governance and discipline. Once a choice has been made it is very hard to detract from it as the damage could have already been done.

The risks to a business of being associated with a tainted party or organisation will far outweigh the direct benefits of financial gain. It is important to look beyond the mere financial profit from the association and not allow individuals to influence the due diligence and assessment process. Unfortunately individuals are motivated by greed, short term gain and lucrative bonus pools. Conflicts of interest can also cause wrong decisions to be made and these need to be avoided. The reach of acts like the US Foreign Corrupt Practices Act regarding doing business with politically exposed parties can have far reaching consequences.

The long term implications and reputational damage that can arise from business relationships need to be factored into any decision. These might extend well beyond just the loss of a single potential lucrative account or deal, but could result in the loss of existing other clients, regulatory fines, the sanction or suspension by professional bodies and associations, criminal prosecution and jail sentences.

Lessons to be learned in managing association risk:

  • Don’t get involved with any parties who have a controversial reputation.
  • Never downplay the importance of your own reputation, ethical standards and values.
  • Make sure you have robust governance and risk management processes in place and stick to them.
  • Don’t let individual personalities influence or negate good governance processes.
  • Monitor the reputation of your customers, suppliers and service providers on an on-going basis.
  • Undertake detailed background and independent reference checks of unknown parties, including their senior office bearers, shareholders and directors before doing business with them.
  • You need to be hyper-vigilant about what you get involved in and who you get involved with.
  • Be particularly weary of doing business with parties classified as Politically Exposed Persons (PEPs) & Prominent Influential Persons (PIPs).
  • If you are concerned by the reputation or actions of an existing customer, rather exit this relationship sooner than later.
  • It is never too late to say “we are sorry, we did something wrong” and to act decisively and do the right thing.
  • Remember that you are responsible for the actions or lack thereof by your business associates. This includes loss of data or confidentiality.
  • Have a crisis management plan in place to manage any fall out while you exit any adverse relationship.


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