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Jasmeet Wadehra
General Counsel
International Paper – India
Corruption Risk Assessment
Law Enforcement and Regulators
Need to focus time, effort and resources
Supports risk awareness and structured
decision making
Highlighted in FCPA & Bribery Act guidance
Complexities of multi-jurisdiction business
Ministry of Justice (out of 6 key principles) lists risk assessment :
• “The commercial organisation assesses the nature and extent of its exposure to potential external and internal risks of bribery on its behalf by persons associated with it. The assessment is periodic, informed and documented.”
FCPA Guidance highlights importance of risk assessment: “Assessment of risk is fundamental to developing a strong compliance program...
One-sizefits-all compliance programs are generally ill-conceived and ineffective because resources inevitably are spread too thin... Devoting a disproportionate amount of time to policing modest entertainment and gift-giving instead of focusing on large government bids, questionable payments to third-party consultants, or excessive discounts to resellers and distributors may indicate that a company’s compliance program is ineffective.”
Source: Transparency International UK’s Diagnosing Bribery Risk: Guidance for the Conduct of Effective
Bribery Risk Assessment
Reputation
Compliance with laws and avoiding prosecutions or fines
Conducting business ethically
Revenue, profitability and share value targets
CSR and/or Sustainability
Maintaining strong relationships with government and/or business partners
Fulfilling ethical compliance requirements imposed by a customer
Access to particular markets (e.g. public procurement opportunities within the EU)
Defining acceptable levels of variation in
performance
Zero tolerance – a misnomer?
Example: Determining limits of gifts &
entertainment, disclosure decisions, etc.
Acceptance – treating a risk and its consequences as a cost of doing business (for non critical matters)
Avoidance – decision to cease a particular activity or exit a market to eliminate risk completely
Reduction – implementation of programs, processes and controls to reduce risk to acceptable levels
Sharing – includes insurance, outsourcing, joint ventures and other forms of business partnering
Cost/benefit analysis of responses to risks
Internal
• Line managers
• Functional managers External
• Opinion releases and similar sources from the DoJ and SEC
• Past legal cases relevant to the business
• Guidance from industry bodies
• Professional advisers
• Independent experts such as NGOs
• Customers
• Peer companies
• Embassies/consulates
• Industry bodies
Open consultation helps in sending right signals.
Modes include workshops, interviews, questionnaires or risk template to be filled in by
information providers (Validation important)
TI Corruption Perceptions Index
TI Bribe Payers Index
TI Global Corruption Barometer
TI National Integrity Studies
World Bank Governance Indicators World Bank Ease of Doing Business Report
Categories (UK MOJ Guidance)
• Country risk
• Sectoral risk
• Transactional risk
• Business opportunity risk
• Business partnership risk
Enforcement of anti-bribery legislation
Lack of transparency in business dealings
Impenetrable bureaucracies
Need to use intermediaries to gain access to people in positions of
power
Lack of an established rule of law
Lack of a truly independent and impartial judiciary
Lack of effective democratic institutions
Lack of independent media
Pressure to conform to specific cultural norms and customs or
unfamiliar business practices
which may conflict with applicable anti-bribery laws
The prevalence of requests to make ‘grease’ or ‘facilitation’
payments’ to expedite processes.
• There is regional variation within countries
• Risks may vary significantly between sectors and business models
Requirement to operate in high risk countries High degree of government interaction High levels of regulation High value, complex and/or long term contracts Multiple business partners, stakeholders and/or
complex contractual or corporate structures
Examples: Extractive industries Large scale infrastructure
Subject matter of transaction Identity and nature of counterparty Degree of transparency Criticality of supply of services/goods
(importance/urgency)
Examples: Sales to government customers, particularly in higher risk countries Gifts, hospitality and travel expenditure Use of company assets for the benefit of third parties Charitable and political donations Sponsorships Giving employment to persons connected with government officials Obtaining licences, permits and regulatory clearances of any kind Movement of goods across borders and related activities Lobbying governments on policy, legislation and/or regulations
MoJ Guidance defines this risk as follows:
Such risks might arise in high value projects or with projects
involving many contractors or intermediaries; or with projects which
are not apparently undertaken at market prices, or which do not have
a clear legitimate objective
Examples:
Costs of goods or services out of proportion to value received
Intermediaries or other third parties whose contribution is unclear
The procurement of goods or services with uncertain purpose
Intermediaries Sales agents, distributors, contractors and sub-contractors, customs
agents and freight forwarders, lobbyists, lawyers, tax advisers, advertising agents, event organisers, visa agents, introducers, consultants
Joint Ventures
• certain markets may have this as the only option of doing business
• liability for acts of venture or partner
• legal form, control, etc. are important considerations
Consortia
Likelihood
Impact
3D approach
Mapping risks to controls
Gap analysis
Remediation
Follow up, monitoring and enforcement
Reporting
Risk Id Risk Area Description Active/
Passiv
e
Public/Pri
vate
Risk
Rating
Business
Unit/
Function
Associated
Parties
1 Cash
Payments
2 Gifts
3 Travel,
Hospitality,
Entertainmen
t
4 Sponsorship
s and grants
5 Charitable
donations
6 Political
donations
Risk Id Risk Area Description Active/
Passiv
e
Public/Pri
vate
Risk
Rating
Business
Unit/
Function
Associated
Parties
7 Discounts
and rebates
8 Employment
9 Sales
10 Customs
11 Lobbying
12 Licenses and
permits
13 Tax
14 Legal
disputes
15 Anti-
Counterfeitin
g
Risk Id Risk Area Description Active/
Passiv
e
Public/Pri
vate
Risk
Rating
Business
Unit/
Function
Associated
Parties
16 Joint
ventures
17 Acquisitions
18 International
mobility
19 Security
20 Corporate
Social
Responsibilit
y
21 Intermediarie
s
22
23
Q & A