Post on 16-Jul-2015
CORRUPTION RISK MANAGEMENT
○ Legal framework and corporate implementation
○ Corruption: consequences and risks
○ How do companies bypass anti-corruption frameworks?
Corruption is the abuse of entrusted power for personal gain.
Multiple forms:○ bribery○ embezzlement○ fraud○ extortion○ ...
THE LEGALITIES OF ANTI-CORRUPTION
A body of anti-corruption guidelines and treaties exists:
○ For states UNCAC, OECD Convention, etc.
○ For business US Foreign Corrupt Practices Act (FCPA), UK Bribery
Act, International Chamber of Commerce Rules of Conduct
But at the end, corporations define
their own anti-corruption policies.
CONSEQUENCES OF CORRUPTION
○ Artificially high prices and low quality○ Uneven distribution of wealth○ Low attractiveness for foreign investors and
international trade○ Low-quality education and healthcare provision○ Political instability○ ...
CORRUPTION IS FAR FROM HARMLESS
Corporate○ financial losses from supply chain○ asset theft and other fraud○ regulatory violations○ reputation/corporate image○ CSR issues (e.g., breaching environmental safeguards)
Personal:○ prosecution○ sanctions (financial fines, disbarment from holding office,
jail sentences).
CORPORATE POLICIES
A riddle: ○ do company executives play around anti-corruption
policies? (hint: yes)
○ does bypassing anti-corruption policies generate new risks? (hint: yes)
Company executives are paid to maximize profits, not to behave ethically. Evidence suggests that they behave as corruptly as they can, within whatever constraints are imposed by law and reputation.(E. Porter, the New York Times, ‘The Spreading Scourge of Corporate Corruption’, 10 July 2012)
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CORRUPTION RISK ASSESSMENT
(Ernst & Young Global Ltd., ‘Bribery and Corruption: Navigating the Global Risks’, 2012)
○ company’s geographic location(s)○ business sectors scoped○ business partners + nature of activities &
transactions○ interactions between partners & local officials
$5.8 million bribe money
Gold, silver
HOW DO BUSINESSES BYPASS ANTI-CORRUPTION
FRAMEWORKS?
Offshore & Shell Companies
Collusion &
Money Laundering
$5.8 million bribe money
19 dead
Gold, silver
HOW DO BUSINESSES BYPASS ANTI-CORRUPTION
FRAMEWORKS?
Offshore & Shell Companies
Collusion &
Money Laundering
Conflict of interest & Influence Peddling
CONCLUSIONS
Corruption:
○ is not a risk limitation tool ○ may generate new risks ○ may be legal○ has to be included in the risk assessment process○ produces irreversible damage