The many (dis)guises of corruption
By Melissa Lea

Spencer Stuart / DirectorS & Boar DS Director S r oSter T here’s no question today’s global economy provides great opportunity. But it also pres- ents a myriad of new risks as multinational businesses expand into new and emerging markets. One of the most significant risks is the potential for bribery or corruption. Understanding and addressing this risk is more complicated than it may first appear, especially when cultural differences and vary- ing legal requirements in new markets come into play. Businesses must take rea- sonable steps to establish pol- icies, improve controls, and ensure senior-level oversight o f g l o b a l o p e r a t i o n s . T h e right people must be given author it y to dr ive anticor- ruption efforts and be made accountable. The board needs to understand what consti- tutes corruption in different countries. And the company m u s t b e p re p a re d to w a l k away from potentially corrupt transactions — all of which requires advance identifica- tion of potential corruption. One essential element to protecting your business and brand, and to ensuring ethical standards are followed across the globe, is adopting technology that keeps everyone apprised of what’s being done in the company’s name. The predominant missteps What’s legal and illegal? The types of corrupt practices possible are limited only by the imaginations of those intent on corrupting. However, missteps gener- ally fall into three categories: • An employee offers an outright bribe to influence a business decision. This is the most obvious type of misconduct and must be prohibited by clear and well-publicized policies. • Gifts and entertainment are so exces- sive that they appear designed to influ- ence decisions. Clear policies and con- sistent enforcement can help employees distinguish between a small business courtesy and some- thing resembling a bribe. • Independent third parties retained by a company en- gage in some seemingly ille- gal activity on the company’s behalf. The first two scenarios are within your control, because they involve employees. The t h i r d s c e n a r i o , h o w e v e r, presents unique challenges, b e c a u s e t h i r d - p a r t y s a l e s agents, suppliers, distribu- tors, and consultants aren’t d i r e c t l y e m p l o y e d b y t h e company. In this situation, communicating and enforc- ing company expectations is a priority, because you can be held accountable for third- party conduct. The challenge, however, is getting a clear view of all third-party relationships and their status (which can change frequently). The right data gives you a holistic view of third-party practices, enabling you to mobilize the right resources to mitigate risks — especially in high-risk locations. The bottom line: The risks and poten- tial consequences of corruption can’t be mitigated by using third parties. Who leads the charge? Despite the legal, financial, and reputa- tional risks that corruption poses, many companies are playing catch-up in man- aging these risks. One problem is decid- ing who should lead the charge. Many boards delegate the task to legal counsel. A better approach is having local busi- ness management participate in the risk analysis. Business ow ners, w ith the suppor t of legal counsel, should help decide whether to retain a third party, because they’re in the best position to know less obvious information, such as the third party’s reputation for corruption. More than in-house lawyers, business owners know the value and intimacy of certain third-party relationships. They’re also more likely to know how important rela- tionships are established and tradition- ally maintained, as well as when to walk away from suspect transactions. Use technology How can you obtain the necessary infor- mation? One answer is using technology and automation to complement audits conducted by risk management experts. Developing databases to catalog and track activities identified by business owners, and providing analyses of these activities to the board, delivers real value. Not only is automation cost effective, it can also identify potentially trouble- some trends that otherwise would be buried in unsynthesized data. Ideally, the automation tool would allow business owners to set customizable risk thresh- olds (such as retainer limits) and signal when those thresholds are breached. The resulting hard data would then inform conversations about risks and business activities and provide the foundation for solid mitigation plans. Incorporating automation into your anticorruption efforts will strengthen your company’s internal knowledge and external profile, bolstering its long-term sustainability and giving all stakeholders greater piece of mind. ■ The author can be contacted at melissa.lea@ c orporate accounta Bility agen Da The many (dis)guises of corruption Battling bribery in your global business practices? Incorporate technology and automation to bolster your risk management. By MeliSSa lea Melissa Lea practiced corporate defense litigation with various law firms before joining SAP in 2002, where she is responsible for policy management and enforcement on a global basis. Second Quarter 2008 13

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