If you are a business owner dealing with suppliers, you are potentially at risk of penalty for corruption related offences.
While the response of countries to corruption offences differs around the world, most countries consider such conduct to be unacceptable, and in most cases illegal.
While some of Australia’s neighbors in the Asia-Pacific region may take little more than a perfunctory stance on enforcement matters, both the United States and the United Kingdom have sophisticated enforcement regimes with well-resourced and experienced regulators to enforce robust and wide-ranging legislation.
In Australia, the corruption regulator, the Australian Federal Police (AFP), has traditionally lacked both the funding and resources to tackle corruption issues with the same level of conviction as its US counterpart, the Department of Justice (DOJ).
As a result of perceived inaction on the part of the Australian regulator, many Australian corporates have become complacent and invested too little time and energy into ensuring their compliance with anti-corruption legislation in all jurisdictions in which they (and their supply chain) operate.
That’s a big mistake and one that could have enormous consequences for your business, as all indications suggest that Australia will be ramping up its enforcement of corruption issues, leaving your business exposed to prosecution risk.
Is a third party putting your supply chain at risk?
On 25 January 2017, Transparency International launched its annual Corruption Perceptions Index, which scores and ranks 176 countries and territories from around the world on perceived levels of corruption, from 0, being very corrupt, to 100, being very clean.
Australia remains outside the top 10 countries on the index for the third consecutive year, but perhaps more alarmingly, of Australia’s top ten trading partners, six have weaker (in some cases, significantly weaker) scores than Australia. This highlights the challenges that Australian businesses face in doing business in a number of key overseas markets.
With this in mind, it’s important that you take a hard look at your supply chain and ask yourself a few simple questions:
- How well do you know your supply chain participants, particularly once your supply chain extends overseas?
- Are you or any members of your supply chain dealing with partners in any high-risk jurisdictions throughout the Asia-Pacific region? (The answer is almost certainly yes.)
- Are you confident that your business has in place processes to identify exposure to any corrupt third party suppliers or vendors at any point in your supply chain?
Practically speaking, prevaricating on any of these questions can quickly compound into a variety of serious issues. Beyond simply dealing with potential penalties in Australia, the extra-territorial reach of both the US and UK regulators means that you could be faced with the complexity and cost of dealing with overseas regulators, not to mention the potential disruption to your supply chain and the inevitable damage to your brand.
Recent headline grabbing scandals in the oil and gas sector, as well as for Australian companies operating in the Asia Pacific region, offer real life examples of how quickly things can go wrong.
Taking the risk out of your supply chain
Taking decisive action now to master your supply chain is imperative to minimise your exposure.
Beyond simply announcing a zero tolerance policy, you need to take pro-active steps to not just demonstrate action, but to also take control. These steps should include:
- Conducting a robust assessment of your supply chain risk exposure. Take a holistic look at your supply chain and evaluate your suppliers against the legislation, regulation, and compliance requirements that they’re subject to, and where sufficient due diligence wasn’t conducted, start now.
- Putting a plan in place to mitigate any existing risks. Safeguard your supply chain by demanding more transparency from your suppliers and, when necessary, identifying alternative partners through robust due diligence.
- Introducing new protocols. Anti-corruption needs to be embedded into your organisation’s DNA. That means having the right protocols to not only ensure compliance but to also demonstrate that fact to regulators both here in Australia and abroad.
Your supply chain may be putting you at serious risk, but it doesn’t have to.
Make 2017 the year that you start investing in your anti-corruption protocols so that you’re prepared no matter what comes your way. Even a small investment now could save you from tremendous headaches later.