1. Trade Caoacity Vietnam
Companies and corruption: Reality check (benefits and harms)
sequa, March 2017
What is Corruption

2. What benefits (1)
A reputation as a business that trades ethically increases your chances of selection as a supplier to large multinationals in their supply chain, and better access to international markets.
A record of integrity will enhance your opportunities to acquire government business.
With a good anti-bribery Programme in place, your business and your associates will be better protected against legal penalties, loss of licenses and blacklisting.
sequa, March 2017
What is Corruption

3. Your business will be more attractive to financial organisations.
What benefits (2)
If you are considering selling your business, a good reputation will be more attractive for acquisition.
A business with ethical standards is a good place to work and will encourage good working relationships and morale.
Your business will be more attractive to financial organisations.
You, and not some bribe payer or bribe receiver, will be in control of your business decisions. Your organisation will save money which might otherwise be squandered on bribes, gifts and inducements.
sequa, March 2017
What is Corruption

4. What harms (1)
Bribery is illegal, and therefore a criminal offence which carries severe financial penalties and even the risk of imprisonment for responsible directors and managers.
Even if the country in which you operate or to which you sell, does not have anti-bribery laws, you may be selling into other countries which can enforce penalties for corruption.
sequa, March 2017
What is Corruption

5. What harms (2)
Negative consequences for failing to prevent corruption can result in:
Legal sanctions for corruption (criminal fines, compensatory damages, imprisonment)
Commercial and operational sanctions, such as debarment from public tenders, unfavourable financing conditions, sanctions of business partners or customers with negative impacts on day-to-day activities such as buying, producing, selling, hiring, investing
Negative reputation of the company and its employees among peers, business partners and customers, and the general public: Negative reputation often triggers additional commercial sanctions with decreases in sales or lower attractiveness for investments.
sequa, March 2017
What is Corruption

6. Consequences in corruption case: corrupt acting employees
In case of corruption in the company, the corrupt acting employee, the board management and the company as a whole can be assigned with penalties:
It usually does not matter whether it is active or passive corruption or misconduct with public officials or with business partners.
Corruption case
Corrupt acting employee
Board and Senior Management
Business ( Legal Person)
sequa, March 2017
What is Corruption

7. Consequences of corruption
Legal consequences
Economic consequences
Infidelity: fine or imprisonment
Money laundering: imprisonment
Embezzlement: fine or imprisonment
Fraud: fine or imprisonment
Extortion: fine or imprisonment
False accounting : fine or imprisonment
Tax evasion: fine or imprisonment
High (unplanned) costs for the elucidation of facts:
External consultancy costs
Procedural costs
Integration of board and senior management
Effort as being partly not deductible in the tax return
Impairment of liquidity (as many of the above costs incurred under high time pressure)
Improvement of internal structures and processes (often under tight deadlines and cost constraints)
Nullity of contracts
Forfeiture of insurance benefits
sequa, March 2017
What is Corruption

8. Advantages of an anti-corruption programme
Minimize the risk of active and passive corruption
Mitigating incentives: reduced sanctions
Commercial and operational advantages (e.g., preferred supplier status, employee recruitment)
Improved reputation
Deterring corrupt business partners and other actors with appropriate communication
Detection of process inefficiencies (e.g. in shopping area)
Anti- Corruption Advantages
sequa, March 2017
What is Corruption

9. Components of an anti-corruption programme
Example
OECD:
Good Practice Guidance on Internal Controls, Ethics, and Compliance
International Chamber of Commerce: Rules of Conduct
Transparency International: Business Principles for Countering Bribery
Support and commitment from the leadership
Corporate policy prohibiting foreign bribery
Oversight over the programme and measures
Measures for third parties
System of financial and accounting procedures, including a system of internal controls
Communication and documented training measures
Promotion and assistance in compliance of programs
Appropriate disciplinary procedures
Possibility of confidential whistle- blowing
Regular checks
Company senior management as Role model
Correct handling of business partners and authorities
Handling of gifts and donations
Clear separation between business and private area
Avoiding conflicts of interest
Four-eyes principle, separation of functions and documentation
Rotation of staff in sensitive areas
Alternative Suppliers
Confidential whistle-blower system
Information and Communication
Plausibility checks
Strengthening of audit and compliance
Sanctions
Business Principles:
The Company shall, whether directly or indirectly, prohibit any form of corruption in any form.
The company should commit to the implementation of a program to combat corruption
Organization and Responsibilities
Business Relations
Human Resources
Training
Raising concerns and seeking guidance
Communication
Internal audit and account auditing
sequa, March 2017
Guidelines for small and medium-sized enterprises comprise similar components (e.g. Transparency International Business Principles for Countering Bribery - SME Edition).
What is Corruption

10. Risk minimization and Economy
The components of an anti-corruption program for small and medium-sized enterprises are generally identical to programs of large, multinational companies.
This allows companies to have the "wheel not reinvent" for the design, there is a wealth of information.
However, this should not simply be copied, but are adapted to the requirements and risk characteristics of the company.
Risk minimization
Economy
sequa, March 2017
What is Corruption

11. 3 Steps Approach for companies to fight corruption
Business environment with reduced corruption risk
Internal Measures
External Measures
Collective Measures
Establishment of an anti-corruption programme
Discussion of internal guidelines, measures and experience values with external stakeholders
Building sector co-operation and collaboration with business partners and other stakeholders (e.g., NGOs, Chamber of commerce) to initiate joint activities in the fight against corruption
Even companies that have established internal measures to fight corruption can be exposed to competitive disadvantages, or lack the leverage to change the business environment.
A collective approach helps to level the playing field and creates a business environment with reduced risk of corruption.
sequa, March 2017
Source: Adapted from Global Compact “Business against Corruption - A Framework for Action”, 2006
What is Corruption