Foreign business partners can present opportunities, and risks. When it comes to stamping out corruption, training pays.
In today’s global marketplace, engaging foreign business partners can be an essential component of maximizing business opportunities. Partnerships can offer lower-cost labor, regional insights and connections — and in some cases are legally required for doing business in a country. However, these partners can also present risks, particularly when it comes to corruption.
How big of a risk? Intermediaries were involved in three out of four foreign-bribery cases brought by OECD member countries since the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions entered into force in 1999, according to last year’s Foreign Bribery Report. In the U.S., all but one of the enforcement actions concluded in 2014 involved third parties.
Even companies that have implemented anti-corruption compliance programs may have little idea how third parties are doing compliance-wise. Indeed, ensuring anti-corruption compliance by third parties over whom a company may have little control can be a complex task. In emerging markets, where the business sector may have little experience with compliance, the difficulty can be exponentially greater.
To manage the risks posed by third parties, most companies perform some level of risk-based due diligence before entering into a relationship and use contract provisions — such as a right to terminate the contract for corruption. Still others have specific codes of conduct that vendors are expected to implement, or require them to have similar policies and procedures of their own. However, a minority — fewer than 20 percent, according to a Dow Jones Risk & Compliance survey — monitor third parties on a regular basis to ensure they are actually complying with anti-corruption requirements, calling into question the utility of these measures.
Enforcement trends and guidance from authorities point to another — perhaps more useful — step that companies can take to increase the level of compliance among third parties: ongoing anti-corruption training.
Training of Third Parties on the Rise
There is a small but growing set of leading companies putting in place anti-corruption training and capacity-building measures for their business partners.
For example, a Microsoft program introduced in 2013 requires the company’s business partners to provide anti-corruption training to all employees who resell, distribute or market Microsoft products or services. Microsoft has provided a free e-learning module on its website for any partner who wants to use it.
Cisco works closely with third parties to communicate its code of conduct requirements, monitor compliance, improve partner performance and build their capacity — including training and sharing of best practices.
Swedish multinational Ericsson requires its suppliers to take an online course and test on its code of conduct with anti-corruption practices.
In addition to providing ethics and compliance training for its business partners, Fluor worked with the American Society of Civil Engineers to develop ETHICANA, a training video for companies and universities that shows the devastating effects of corruption major construction and engineering projects.
However, these examples appear to be exceptions to the rule, despite the fact that guidance issued by the U.S. Department of Justice and Securities and Exchange Commission makes clear that a risk-based approach to training of third parties and business partners is one of the “hallmarks” of an effective program — and one of the factors on which a company’s program will be evaluated.
Most companies focus their training efforts solely on employees, and even this effort often falls short of providing specific, risk-based training tailored to various business units. According to the Kroll/Compliance Week 2014 Anti-Bribery and Corruption Benchmarking Report, 58 percent of the 250 multinational companies polled take no steps to train their business partners on anti-corruption, despite expectations by more than half that their companies’ bribery and corruption risks would increase in the coming year.
The research also noted that of those who do train their third parties, only a third believes that their efforts are effective. As such, companies need to consider ways to make sure that training has true impact.
Best practices for training include:
- Using real-world examples of how companies have gone wrong;
- Making training interactive with scenarios;
- Conducting training in short modules with frequent reinforcement, particularly during “problem times,” such as holidays and for topics that can be easy to forget; and
- Offering the courses in the local language.
Anti-corruption compliance can be complex and challenging to implement, particularly when third parties are spread across the globe. A robust training program for third parties not only sets expectations, but can reduce risks among those who pose the greatest danger.
(Top image: Courtesy of Thinkstock.com)
Leslie Benton is Vice President of Advocacy and Stakeholder Engagement at the Center for Responsible Enterprise And Trade (CREATe.org). She is a former Senior Vice President of Levick Strategic Communications, where she led the anti-corruption and compliance communications practice. As Senior Policy Director for the U.S. chapter of Transparency International, Ms. Benton spearheaded the chapter’s outreach to the U.S. Government, the G8 and G20, international institutions, multilateral development banks and the private sector.