PwC offers guidance on changing corruption risks

Latest in PwC's “10Minutes” Thought Leadership series poses key forensic questions for executives to direct to operational teams

NEW YORK, November 8, 2011 – PwC US today released "10Minutes on changing corruption risks,” part of the firm’s innovative thought leadership series providing senior executives with “straight-to-the-point” perspectives on critical business issues.

The report asserts that the anti-corruption regulatory movement is emerging as one of the most formidable compliance challenges confronting the private sector. At the same time, major multinationals have taken significant steps to bolster their controls. Yet more can still be done, according to PwC.

“Too often we’re seeing that greater commitment at the top is not effectively flowing through the organization,” said Frederic R. Miller, PwC partner and Co-leader FCPA Practice, Forensic Services. “Companies are often not addressing the related financial controls that can detect and prevent bribery with the same alacrity, nor are they always extending policies to parties who act on their behalf.”

To help business leader s and corporate directors establish improved controls, “10Minutes on changing corruption risks” puts forth eight questions for executives to direct to their operational teams. These include:

Do we know how anti-corruption initiatives in other jurisdictions could impact us? Acting with integrity deserves to be a high priority for U.S. companies with an international presence. The likelihood of an investigation is much higher than even a few years ago. Tailoring policies to comply with U.S. law will no longer suffice. There is a lot of overlap, but jurisdictions nonetheless define aspects of corruption differently.
Are we focused on the right risks in the right places? Instead of adding to layers of complexity, PwC asserts that it is possible – indeed advisable – to have a single global anti-corruption framework that accounts for corruption risks companies confront in different regions. Rules are not that drastically different under the various international frameworks. Moreover, regulators clearly seem to favour risk-based compliance programs, and also expect that companies do more where the risks of corruption are higher.
Are our policies well understood by our employees? Employees should understand how the company defines corruption or bribery, and what constitutes an infraction. Those in high-risk areas like contracting should know how to report an occurrence, and importantly, feel comfortable that the company won’t retaliate. Yet employees should also know about the consequences, and that might mean publicizing reprimands.
Are our policies well understood by the people we do business with? All parties acting on behalf of the company should understand that they, as well as the company, are liable for their actions, and know who in the company is overseeing the initiative.
Do we have the resources to do this task? Currently available technology can be used to make due diligence more uniform and efficient. While IT systems will send up red or green flags, IT will not be able to do this alone. Upgrading controls and staffing compliance costs money and isn’t an area to do more with less. What won’t serve companies well in this climate is a paper tiger.
Do we need to change the way we treat facilitation payments or marketing costs? The US and UK treat these small payments differently. Perhaps in recognition of the dilemma this creates, guidance from the UK and the OECD set some importance on phasing out facilitation payments. For now, companies will want to be sure they’re accounting for them appropriately, and importantly, that they’ve clearly defined acceptable facilitation payments and marketing costs.
What do sector-wide investigations mean for our company? Risks are greater for companies in the same industry in which probes are already under way. Companies in such sectors need to carefully assess their risk accordingly. It may change the dynamics involved with taking the initiative to report any violation that the company itself uncovers to authorities.
What is our response to possible whistleblowers in our company? In PwC’s view, the 2010 Dodd-Frank reforms are very likely to inspire complaints and tips to the SEC. In response, some smarter companies are evaluating how to change their compliance programs to address how quickly they are able to respond to reports of violations and whether ‘no retaliation’ policies are effectively in place.

To obtain a copy of “10Minutes on changing corruption risks,” please visit: www.pwc.com/en_US/us/10minutes/assets/10Minutes-changing-corruption-risks.pdf

10Minutes” Thought Leadership Series

The “10Minutes” series provides PwC’s perspectives on critical business issues of interest to senior executives in crisp, to-the-point language and a simple format that requires about 10 minutes of an executive reader's time. To learn more, visit www.pwc.com/10minutes.

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PwC global Forensic Services team of experienced professionals is dedicated to meeting the challenges caused by fraud allegations, financial crimes and other irregularities. Our portfolio of specialist services includes: Financial Crime Examinations, Forensic Technology Solutions, Regulatory Compliance Reviews, Fraud Risk Management and Fraud Prevention, Dispute Analysis and Litigation Support. The Forensic Services team also manages the PwC Fraud Forum, an exclusive community where members can gain knowledge, participate in events and share important insights on preventing, detecting and investigating fraud, corruption and economic crime. See www.pwc.com/us/forensics and http://usfraudforum.pwc.com for more information.

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Suzanne Dawson
Linden Alschuler & Kaplan
Tel: +1 (212) 329-1420
sdawson@lakpr.com