HOW DO COMPANIESDEAL WITH CORRUPTION?

CORRUPTION RISK MANAGEMENT

○ Legal framework and corporate implementation

○ Corruption: consequences and risks

○ How do companies bypass anti-corruption frameworks?

FRAMEWORKS & IMPLEMENTATIONThe good, the bad and the corrupt

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 & RISKSCorporate corruption around the (corporate) world

“

Corruption is pervasive

… And so are its consequences worldover

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).

BYPASSING ANTI-CORRUPTIONNone shall pass! (Sort of)

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)

“

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

Gold, silver

HOW DO BUSINESSES BYPASS ANTI-CORRUPTION

FRAMEWORKS?

Offshore & Shell Companies

$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

THANKS!Oh, and do you have questions?