Compliance Control: Assessing Your Program For Anti-Corruption Effectiveness
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This document summarizes a presentation on verifying corporate anti-corruption compliance programs. It discusses: 1) The purpose of verifying programs is to improve compliance and increase transparency with regulators and the public. 2) Effective verification requires internal reviews, external reviews of high-risk areas, and public reporting on program implementation. 3) A risk-based approach is key to define program scope and verification, considering geographic, sector, partner, and transaction risks.
Compliance Control: Assessing Your Program For Anti-Corruption Effectiveness
- 1. GOOD. SMART. BUSINESS. PROFIT. TM
- 2. Compliance Control: Assessing Your Program for Anti-Corruption Effectiveness September 16, 2014
- 3. Chelsie Chmela Events Manager Chelsie.Chemla@ethisphere.com 703.960.2360 We welcome you to submit any questions for the panel through the chat functions you see on your screen. HOST QUESTIONS MATERIALS The event recording and PowerPoint presentation will be provided post event. 3
- 4. Shruti Shah Senior Policy Director Transparency International-USA Matthew Heiman Vice President, Chief Compliance & Ethics Officer Tyco International Charles E. Duross Partner, Head of Global Anti-Corruption Practice Morrison & Foerster SPEAKING TODAY
- 5. Verification of Anti-Corruption Compliance Programs Shruti Shah Senior Policy Director Transparency International-USA
- 6. 6 Verification refers to all efforts (internal and external) to assess that an organization has a risk-appropriate and effective program for preventing and detecting corruption in its business operations. What is verification?
- 7. 7 • Numerous bribery investigations and widespread disclosures of corporate shortcomings have resulted in a loss of confidence in corporate self-regulation. • Project based on two premises: • The quality of corporate compliance programs must be improved. Verification of the effectiveness of compliance programs will assist companies in determining what changes are needed. • There should be greater public disclosure about anti-corruption programs, as well as communication with regulators, securities analysts, the media and NGOs. Purpose of Our Study
- 8. 8 Structure of the Study • TI-USA conducted extensive research in five areas: a) Public reporting by companies b) Verification work by accountants, lawyers, and consulting firms c) Companies providing certification of anti-corruption programs d) Reviews performed by government-mandated monitors e) Social and Environmental certification approaches. • The TI-USA team consulted with compliance officers in U.S. companies, practitioners, government-mandated monitors, and certification companies. • An Advisory Board of recognized international experts reviewed the findings and contributed to the conclusions and recommendations.
- 9. 9 Major Findings • Public reporting is a valuable tool for communicating corporate policy and a company’s commitment to anti-corruption practices to business partners and external stakeholders, as well as within the organization. However, many companies disclose only limited information about their program and policies and rarely describe their implementation efforts. • A review by experienced outside experts enables an organization to see gaps in its compliance program and ultimately can lead to strengthening of its program.
- 10. 10 Major Findings • Certification of compliance is an evolving practice that has yet to gain acceptance from government regulators largely because there are substantial variations in the underlying reviews conducted by certification companies. • There are challenges to applying the approaches used in these social certifications to efforts aimed at curbing corruption as the metrics for anti-corruption verification are more subjective.
- 11. 11 1) The most critical part of verifying corporate anti- corruption compliance is a company’s own internal review. In conducting internal reviews companies must determine the extent to which they can rely on in-house resources and the extent to which they need to supplement those resources with external resources. • Companies should evaluate their program on a regular basis for effectiveness and make the necessary improvements. • Periodic reviews can uncover new risks, contribute to ongoing risk assessments and help companies significantly improve their controls and internal processes. Recommendations
- 12. 12 2) A risk-based approach is essential in defining both the appropriate scope of compliance programs and of verification. A risk-based approach should include a consideration of risks presented by the company’s geographic locations, business sectors, business partners, and the nature of its transactions, as well as the extent of its interactions with government officials. • There is no one-size-fits-all anti-corruption program or method of verifying whether the program is working effectively. • A well-designed program will differ from one company to another depending on countries of operation, industry sector, and past history, among other factors. Recommendations
- 13. 13 Recommendations 3) In addition to internal reviews, companies should undertake independent external reviews on a regularly planned basis. The scope of engagement and the frequency of review will depend largely on the risk profile of a company. Companies with high risk profiles should consider conducting external reviews of their high risk businesses every three years. • In general, external reviews help a company take a fresh look at an existing program to learn about weak spots and areas for improvement and benchmark its programs against other companies.
- 14. 14 Recommendations 4) In choosing external providers companies, should consider the expertise and independence of the provider, define the scope, and understand the limitations of the review. • Meaningful verification requires a team with the right knowledge, skill set, and experience for a particular form of review. • For external reviews, conflicts can arise from past or present affiliation with the company.
- 15. 15 Recommendations 5) Reviewing for program effectiveness in high risk locations cannot be done solely from the corporate center. • Procedures for high risk locations generally include site visits, data mining, interviews, targeted testing of sensitive transactions, analysis of interactions with third party agents, consultants, and other intermediaries, and assessment of relevant internal controls.
- 16. 16 Recommendations 6) Companies should make public disclosures about their anti-corruption programs, including program implementation and verification, to increase transparency and public trust. • The level of public disclosure and reporting should be sufficient to provide adequate public assurance that the company understands and effectively manages the corruption risks of the businesses in which it is engaged.
- 17. 17 Recommendations 7) Certifying organizations, companies, investor groups, and non-governmental organizations should develop broader agreement on the standards for certification to help promote greater transparency of the scope of the review. It is important to clearly define the scope of review on which a certificate is based. • There is no common understanding on the meaning and wording of certificates and what type of review is required as a condition of certification. • Certification may also be used to enhance public credibility, particularly for companies in countries with weak rule of law. • Certification may assist a company in designing or improving its anti- corruption program to meet best practices for its size and industry sector. • Companies that choose to use certification providers to enhance their public credibility should be clear about the scope of the specific review conducted and the qualifications of the reviewers.
- 18. 18 Recommendations 8) The development of the International Standard Organization’s new standard for an anti-bribery management system is potentially a promising development and should be encouraged. • Creation of a single anti-corruption standard is much more difficult than in environmental and social fields. • As anti-corruption programs must be risk-based, and therefore the programs and their implementation will vary from company to company. • As much of the implementation of an anti-corruption program has to be judged on a qualitative basis, it is more difficult to envision quantifiable metrics.
- 20. Verification of Anti-Corruption Compliance Programs Transparency International-USA
- 21. Q&A
- 22. This webcast and all future Ethisphere webcasts are available complimentary and on demand for BELA members. BELA members are also offered complimentary registration to Ethisphere’s Global Ethics Summit and other Summits around the world. For more information on BELA contact: Laara van Loben Sels Senior Director, Engagement Services laara.vanlobensels@ethisphere.com 480.397.2663 Business Ethics Leadership Alliance (BELA)
- 23. September 17, 2014 Anti-Corruption Due Diligence in Transactions: Expectations and Strategies All upcoming Ethisphere events can be found at: http://ethisphere.com/events/ PLEASE JOIN US FOR
- 24. THANK YOU
Editor's Notes
- #6: 5
- #7: Verification of corporate anti-corruption programs is an essential element of compliance programs. At a time of heightened concern about corporate governance, the business community needs to confront the challenge of restoring confidence in self-regulation to strengthen the standing and reputation of corporations with investors, business partners, and the public at large, and to contribute to combatting corruption.
- #8: Goal: Produce a practical guide to help companies verify that their anti-corruption programs are well-designed and working effectively.
- #9: 8
- #10: Public reporting by companies needs to be improved to provide meaningful information to stakeholders regarding how companies manage the corruption risks of the businesses in which they are engaged. The existing social and environmental certification systems are based on internally accepted standards and are widely used and relied upon by consumers, retailers, the press, governments, and investors as indications of good practice.
- #11: Public reporting by companies needs to be improved to provide meaningful information to stakeholders regarding how companies manage the corruption risks of the businesses in which they are engaged. The existing social and environmental certification systems are based on internally accepted standards and are widely used and relied upon by consumers, retailers, the press, governments, and investors as indications of good practice.
- #12: A larger company with greater resources and experienced internal audit and legal staff maybe able to rely on its internal staff for self-assessments. Many companies may, however, also need to supplement their internal resources with outside expert support.
- #13: A risk-based approach should include a consideration of risks presented by the company’s geographic locations, business sectors, business partners, and the nature of its transactions, as well as the interactions with government officials.
- #15: Understanding the scope of the review and its limitations is important. Reviews may not cover the entire corporate entity. Reviews are not a guarantee against improper conduct.
- #16: 15
- #17: Fuller disclosure will be required for companies operating in higher risk countries and sectors. Companies can choose to make this disclosure as part of their annual report or as part of a specialized report such as the corporate citizenship report.
- #18: 17
- #19: 18