Blockchains against corruption
Date: 2024-08-08 Author: Gabriel Deangelo Categories: BLOCKCHAIN
Paul Brodie, Head of Blockchain Technologies at EY, explains how decentralized technologies can help companies cope with macroeconomic threats in an unstable political climate.
How companies can protect themselves from corruption and political risks
Corruption and political risks remain a serious concern for businesses, especially during election years. In 2024, when the world is in a state of instability and tension, companies must be prepared for unexpected changes in the legal and economic landscape. Although decentralized technologies cannot protect against a complete collapse of the rule of law, they can mitigate a number of threats.
Major risks and solutions
1. Currency manipulation. Central banks and treasuries are often subject to political influence, especially during election periods, which can lead to inflation and devaluation of local currencies. It is advisable for businesses to switch to stable cryptocurrencies such as stablecoins and minimize the use of unstable local currencies, if permitted by law.
2. Political interference in the judicial system. Corrupt courts can make unfair decisions, which puts the business environment at risk. Using blockchain technology to create transparent smart contracts that are automatically executed can reduce the risk of non-payment and disputes, ensuring more objective conflict resolution.
3. Corruption at all levels. Corrupt officials can resort to arbitrary regulatory actions and selective enforcement against companies that are not involved in corruption schemes. The best protection in such conditions is complete transparency. If all of a company’s orders, deliveries, purchases, and prices are publicly available, corrupt practices will be visible to everyone, making them difficult to hide.
Blockchain Success Stories
Full transparency may seem unattractive to companies in developed economies, but there are successful examples of its use. In the Indian state of Maharashtra, cooperative farmers from Sahyadri Farmers Producer, faced with volatile prices and high markups from middlemen, began using the Polygon blockchain to publish all of their deliveries and prices. This helped reduce overhead costs and ensure fairer prices for all participants.
Conclusion
While blockchain and cryptocurrency cannot completely eliminate all political risks, they can significantly reduce them. It is important for a business to have assets, personnel, and resources in the marketplace while accepting all of the risks and rewards that come with such activities. Ultimately, not taking risks means not taking opportunities for growth and profit.
