The FINANCIAL — The vast majority of energy and natural resource (ENR) executives from around the world responding to a new KPMG International survey say that addressing anti-bribery and corruption (ABC) is highly or exceedingly challenging. At the top of the list of challenges for 89 percent of respondents? Employee awareness, training and communications and varying country regulations.
Recognizing the magnitude of ABC challenges, KPMG International conducted a survey of 659 executives in a range of functions and industries from around the world. Fifty-four (8 percent) work in the ENR sector (38 of whom work in oil and gas).
Michael Wilson, Lead Partner, Risk in the Boardroom, and Global Lead Energy Risk, KPMG in the UK comments:
“It appears a growing number of companies are finding it more difficult to deal with ABC issues because of their complexity, increasing globalization of operations and the need to deal with these matters in many different jurisdictions in an extremely cost-conscious environment. However, the potential cost of failing to comply with ABC regulations somewhere in the world is significant: sizeable fines, the possibility of imprisonment, and the loss of corporate reputation.”
Eighty percent of respondents also cite managing third-party risk as one of the most difficult areas to deal with as it relates to ABC. ENR executives responding to the KPMG survey titled ‘The growing global challenge: Managing anti-bribery and corruption compliance in energy and natural resources’, say they are challenged by auditing third parties for compliance, dealing with the variation in national regulations pertaining to bribery and corruption and conducting due diligence over them. Sixty-nine percent of ENR respondents say their company’s ABC risk assessment examines the potential risk posed by third parties. But, 41 percent say they do not have a risk-based process for onboarding third parties, according to KPMG.
According to Wilson:
“This is an important gap in the program. A proper procedure to vet third-party agents during the onboarding stage can prevent the contagion of corruption spreading through the organization. Even earlier than onboarding, companies need to make a greater effort to assess third-party risk.”
When asked which business areas they perceive to be high-risk, half of the survey respondents cited corruption at customs and export agencies as they negotiate ports, border crossings and airports to bring in equipment and goods to develop ENR projects outside their home country.
When asked how they manage the risk of bribery and corruption during the transport of equipment and materials across borders, half the oil and gas respondents say they enhance the monitoring of invoices from third-party logistics providers; 47 percent say they conduct follow-up investigations of allegations and take appropriate disciplinary action against employees and third parties, and the same proportion say that they train logistics managers on bribery and corruption.
Even though there is room for improvement in ENR companies’ ABC compliance programs, it seems that organizations are aware of the growing problem of corruption and are taking steps to raise the bar. Indeed, 80 percent of ENR respondents say their company has a formal, written ABC compliance program.
Also, many companies have an array of weapons in their arsenal to combat corruption. Between half and 69 percent have a several elements in their program, including whistleblower mechanisms, training programs, continuous monitoring, a full-time ABC compliance officer, and ABC compliance risk assessments.
Roy Waligora, Forensic Sector Leader, ENR, KPMG in South Africa comments:
“In these tougher times there is an increased burden placed on compliance functions to manage the risk in a cost-effective way. This may seem daunting, but it does not have to be. The first step is to undertake a global risk assessment to find the areas of greatest vulnerability, by geography, function, and operation. Such an assessment, if done well, can or should also reveal the weak points in a company’s suit of armor. To find the gaps and fill them, ENR organizations must make better use of technology, coupled with a risk-based approach, to establish a defendable position.”
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