Part of developing and maintaining a sustainable supply chain is ensuring that a proper governance structure is in place, to mitigate the risk associated with corruption and bribery. Following are some steps a company can take to help its supply chain succeed.
Document policies with management buy-in. Company-wide guidelines should be put in place that help bring awareness to the importance of anti-corruption, anti-bribery, governance and other specific responsibilities of those involved. Processes should be implemented to highlight these guidelines:
- Risk assessment to addresses heightened risks based on factors such as type of industry, geography and use of third parties. For example, the oil and gas industries, or other mining operations, might bring higher risk, as will certain geographical regions such as Africa.
- Training for stakeholders and operational personnel to understand corporate expectations and values. This lies at the heart of an excellent governance program and is vital to its success.
- Cleary defined processes to deal with third parties and payments. This is perhaps the most important aspect of a successful supply chain governance program. It’s important to ensure that those employees dealing with contracts and payments are well versed in local laws.
Watch out for red flags. Awareness of events that might signal illegal or unethical conduct is the first line of defense against corruption. Having employees understand these red flags will help identify potential risk. The next step is making sure there are processes in place for further vetting. Some key red flags for anti-corruption are:
- A party to a transaction with you has a poor business reputation, a history of allegations or non-existent compliance program.
- The business transaction takes place in a country known for widespread corruption.
- A third party is retained for its relationship or connections to, or at the request of, government officials.
- A request for payment is more than the amount required, or any payments are deemed excessive or unusually high.
- Invoices are lacking clarity about the detail of services.
- There is no executed written contract or agreement.
- There are suspicious actions or statements by a party requesting the need for additional payments.
- A party is making requests for payment, donation, services or reimbursement that aren’t necessary or part of the established agreement.
- There are large on-time payments to third parties.
Implement proper controls and audits. These are a key part of a successful anti-corruption governance program. Implement controls by establishing a code of conduct for suppliers and third parties that will include signing a statement certifying they’re on board with your expectations regarding anti-bribery, anti-corruption, conflicts of interest, gifts, kickbacks and the like. This will also require them to state that they agree to maintain the highest ethical standards and comply with all applicable laws.
Audits will include regular reviews of transactions and processes to ensure that corporate policy and legal regulations are being followed. Controls should be put in place to help facilitate the process. Audits to establish include:
- Onboarding of suppliers and third parties, to ensure they have been properly vetted.
- Review of purchases and payments, to ensure they match what is contracted or what is due.
- Review of payments to third parties and government entities to see that they align with what should have been paid; for example, make sure you’re paying your customs brokers based on what is due to customs.
- Review of higher-risk transactions based on value, along with other risks that have been identified.
- Documents and records that are carefully kept and readily accessible.
Anti-corruption controls will help your company keep its good name and good reputation. It’s key to realize that not only employees can put you at risk, but your partners, suppliers and other third parties can as well, and they usually have less oversight. A documented process, a thorough understanding of potential red flags, and an auditing program will go a long way toward mitigating risk and increasing the success of your supply chain.
