The following are two of many recent cases making the news that demonstrate that it’s not just the corporation that bears liability for corruption and bribery — it’s the individual as well. Case one: eight current and nine former management-level employees of a large multinational corporation were charged with bribing foreign officials to help win a contract. Those charged included a board member and a member of the executive committee. Case two: the former president of a U.S. company was sentenced to serve five years in prison and pay a $25,000 criminal fine for his participation in a conspiracy to fix rates and surcharges for freight transported by water between the continental United States and Puerto Rico.
With greater transparency in financial reporting and technologies that enable data to be analyzed for unusual transactions and trends of a suspicious nature, illegal and unethical business practices are being uncovered that previously would have gone undetected. Individuals involved with such actions are being prosecuted with greater frequency, and are no longer able to hide behind the corporate veil. Elevating the exposure is the ever-increasing adoption of corruption and bribery laws in foreign countries. In the past few years alone, Canada, along with 40% of Europe and BRIC (Brazil, Russia, India and China) have adopted or strengthened their anticorruption legislation covering both corporate and individual responsibilities.
Companies that are unable to conclude if their internal policies and controls are effective to deter illegal activities subject themselves to a heightened level of fines, penalties and, for the individuals, imprisonment. A good first step in understanding the risk level at which your company may be operating is to conduct a corporate-wide risk assessment of the areas and activities most vulnerable to illegal practices. A comprehensive risk assessment identifies the inherent risks to your business, identified by area of the business, and ranked by high, moderate or low. The assessment allows the business to focus on those high risks, some moderate, and occasionally low risks, that threaten the company. Once critical risks are identified, the second step is to determine if the controls in place provide effective deterrents to mitigate the risks. A comprehensive analysis of key controls that align with critical risks will aid in the development of a gap analysis representing those risks that are not currently mediated by a control. A comprehensive risk assessment should be updated no less than annually, using the knowledge and experience of your management team and your internal audit department.
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