Businesses – Protect yourself against corruption
High costs of corruption for businesses
Bribery and corruption:
- Undermine economic development
- Distort competition
- Increase legal and auditing costs
- Millions of dollars on top of fines
- Reduce productivity
- Company officials deal with repercussions instead of concentrating on core business
- Employee morale, confidence and productivity plummet
- Impact civil liability
- Stock price usually declines significantly as a result of investigations and/or charges
- Shareholders can sue company officials and board for negligence and lack of due diligence
- Affect business processes
- Company under investigation or suspected of corruption scare away potential buyers
- Many deals have failed because potential buyers feared impacts of past offences
- Impact on brand and potential business
- A company under investigation or convicted of corruption may struggle to get financing or deals
- Potential partners may not want to be associated with a corruption scandal
- Loss of access to arbitration when contract obtained through corruption
- Potential for debarment from government procurement process
- Increase costs to prove legitimacy
- Higher costs or loss of liability insurance for directors and executives
- Higher costs and due diligence requirements
- Higher costs and/or increased difficulties securing financing
- Generate costs and delays due to the rehabilitation process
Use of a business agent – do you know the risks?
- Businesses hire an agent for his/her knowledge, expertise and political/business contacts in a given country. This person assists the company in understanding regulations, procurement process, political and cultural environment. They are often referred to as the "middleman".
- Almost 80% of prosecutions and convictions for bribery and corruption involve the use of agents.
- Businesses are responsible for the actions of their employees, including agents. Agents should be given clear direction as to what is acceptable.
- Companies should have a strong anti-corruption compliance program which applies to agents.
Prevention and detection
The key to prevent and detect bribery and corruption is to be informed and aware of the issues and risks. Processes and systems must be in place to address the factors that lead to bribery and corruption. Businesses should have a solid Anti-Bribery and Anti-Corruption compliance program (ABAC program) in place.
Key elements of an ABAC program
- Active support of senior management in promoting ethical business practices;
- Employee engagement at all levels and recognition of ethical behaviour;
- Clear and consistent policies, code of conduct;
- Internal controls and processes (finance, reporting, structure, approval) that foster accountability and transparency;
- Effective risk assessment and management processes to evaluate risks in transactions and choose the right course of action;
- Due diligence process for agents and third parties to limit and manage this high risk;
- Adequate ABAC training and compliance communication for all employees, according to their risk profile;
- Reporting/whistleblowing system so employees can report allegations of corrupt activity, without fear of reprisals;
- Clear processes and policies on how violations will be investigated and dealt with.
An effective ABAC program can be scaled and tailored to the size, resources and market in which a given company operates. There are a number of free, or inexpensive, tools and resources for small and medium size enterprises (SMEs) who want to develop an ABAC program.
Reporting bribery and corruption
If you think you have witnessed bribery or corruption, the RCMP encourages you to report it to your senior managers. If they take no action, please contact your local police or the RCMP.
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