Case Study (1): Opinion 1

Ethics & Compliance Magazine | Year 1, 2016, Issue #1 | Author(s): Magdalena Calangiu (BRD – Societe Generale)

Corrupt practices are detrimental to all business entities – large and small, multinational or local. Corporate scandals receive enormous attention from the public and the media, and hit the reputation of more than just the particular entity or persons involved.

Taking that into consideration and in order to prevent such situations, my first reaction as Manager of Compliance and Ethics would be that of an urgent action plan focused on the implementation of an anti-corruption program that includes principles to prevent corruption, thus protecting the company’s image as well as the interests of its investors, employees and customers.

As a concrete plan of actions in such situations here is what I would do:
– I would have to advice my management that they need to be the first to set the Tone at the top, show their commitment and demonstrate ownership of such anti-corruption program, in each and every occasion, in front of the employees, clients or business partners, as I know that even a well-defined program as advised by me will fail to reduce the risk of corruption if employees and business partners perceive that senior management is not really committed to preventing corruption. An effective anti-corruption program must be based on the strong, explicit and visible support and commitment from the senior management of the company.

– When advising over the establishment of an anti-corruption program, I would tell management that they should consider a set of underlying elements that enable the program to be effective, efficient and sustainable: formal policy, visible and accessible to all, a risk assessment of the company’s most exposed parts, setting the right organizational culture, putting in place mitigating actions and a process to monitor the effectiveness of all measures implemented.

– I would develop and send for approval a formal policy that addresses in detail and explains the company’s zero tolerance for all manifestations of corruption, such us: bribery of national or foreign public officials, bribery in the private sector, trading in influence, abuse of function, illicit enrichment etc. This approach will further reduce the room for
misinterpretation (e.g. by defining a “public official” or facilitation payments). A policy addressing the above shown manifestations of corruption should be comprehensive in covering different forms and challenges. For example, bribery can take on a variety of forms (such as kickbacks or facilitation payments). Legitimate expenditures can also be misused as a subterfuge for a corrupt act (e.g. gifts, hospitality, travel payments, entertainment, sponsorship, charitable contributions and/or political contributions).

– I would advise the management that such a policy should be visible to all parties within and outside the company and supported by real-world examples or generic case descriptions to enhance the understanding of how the policy applies to day-to-day work situations.

– I would advise on the launch of a detailed risk assessment, in order to determine which parts of the company are most vulnerable and exposed to corruption risk (factors as company’s location, its modus operandi, its interaction with business partners and its structure can influence the scope and impact of the negative consequences of corruption).

– I would like to take a look at the organizational culture, because I know that its culture can also affect the likelihood of corruption in the company. Organizational culture is determined by prevailing social norms and expressed in informal rules of conduct. Companies with an organisational culture based on strong competitiveness, low levels of trust and low integrity are likely to be more prone to corruption than companies where honesty, participation and ethical values are strongly encouraged. The company’s incentive system should therefore be included in the risk assessment.

– Having identified and assessed corruption-related risks, I would advise management to decide the best course of action to handle and ideally minimize identified risks, through a variety of mitigation activities that might include: increased managerial oversight (e.g. four-eyes principle for approvals), tailored training for staff facing bribe requests from public officials, intensified engagement of middle management (e.g. speaking at company events), internal controls to analyze payment streams for longterm, complex contracts, increased due diligence on key suppliers or major
investments.

– I would advise the company’s management to put in place a process to undertake monitoring over effectiveness of such mitigation activities, deciding who is responsible for the process, how often it takes place and how results are taken into account including review and oversight by senior management.

– Finally, I would make the management aware that the implementation of an anti-corruption program is not a one-time activity but an ongoing process. This will require an ongoing commitment (including the provision of sufficient resources) from senior management to ensure that the program is applied in day-to-day activities and kept up-to-date with changes to the business environment.

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