It’s time to get proactive about supplier risk
Running a business can often feel like a plate-spinning exercise.
Recent research carried out by Ernst and Young highlighted the continuing concern in global organisations around fraud, corruption, bribery and the need to ensure compliance to anti-bribery laws across the supply chain.
The survey conducted by Ernst and Young found that 38% of respondents stated that bribery/corrupt practices occur widely in business in their country. The findings from the survey indicate that although business leaders are making commitments to reduce the likelihood of bribery and corrupt practices, there is not a corresponding decrease in the number of reported unethical conduct cases and business failures.
What can you do to ensure compliance to anti-bribery laws, and ensure that your supply chain is using ethical business practices? And is it really that important?
Yes – it’s a serious issue
The consequences of non-compliance with anti-bribery laws can be very serious indeed. There are lots of recent examples of just how serious it can be. In the UK in late 2018, several business executives were convicted for their part in a corrupt scheme to secure a ConocoPhillips freight forwarding contract, eventually worth £16m, for FH Bertling as part of the ‘Jasmine’ North Sea oil exploration project.
Odebrecht, the Brazilian construction firm involved in building venues for the 2016 Olympics, triggered Latin America’s biggest corruption scandal after it admitted it had paid kickbacks to politicians across the region to secure lucrative deals. The list of construction projects linked to Odebrecht include metro lines in Venezuela, an irrigation project in Peru and a port in Cuba, as well as Brazil’s Olympics complex. In 2019, Peru’s president Alan Garcia shot himself after being arrested in a bribery probe.
In Spain, while petty bribery is not widespread in business dealings, the country has intensified attempts to limit corruption, particularly involving politicians. Elsewhere in Europe, Norway ranks among the least corrupt countries in the world, and business is conducted with a high level of transparency.
The reputational and financial damage resulting from breaching anti-bribery laws can put companies out of business. Airbus recently closed one of its subsidiaries after a 7 year investigation concluded that it had paid multimillion pound bribes to secure contracts with the Saudi Arabian government.
The law is clear
Most countries have clear anti-bribery laws. Under UK law, for example, it is illegal to “offer, promise, give, request, agree, receive or accept bribes”. This includes money and gifts.
Buyers and suppliers need to have policies in place that include reducing and controlling bribery risks in their supply chains. This means clear rules about accepting gifts, hospitality or donations, guidance on how to conduct business, and measures to avoid or stop conflicts of interest.
Many businesses are underestimating the reach of anti-bribery laws. There is still a lot of work to be done in this area to ensure that directors and senior managers realise the importance of complying, and begin to examine whether their entire supply chain is meeting these same standards.
Failure to take steps to eradicate bribery from the supply chain not only harms competition, but it comes with reputational and legal risks for any business.
The power of audits
Supplier audits, conducted by a trusted third party, can include questions about bribery on behalf of buying organisations to ensure all suppliers in the supply chain are in compliance with anti-bribery laws. This gives you peace of mind that not only do your suppliers have the appropriate anti-bribery policies in place, but they can also demonstrate the implementation of those policies.
For example, in Achilles audits, our trained assessors will look to ensure that organisations, operating within the UK or managing UK operations, understand that the UK Bribery Act is in force and have measures in place to control it. This includes ensuring there is a policy to comply with the legislation, that employees are briefed about the requirements of the legislation, and that there are clear guidelines to let stakeholders know what is and isn’t allowed.
Other best practices suppliers should include are whistleblowing policies, potential reporting lines, and escalation points for instances of identifying bribery and corruption within the supply chain.
Learn more about our supply chain management tools today.