What is in this article?:
- Managing Ethics and Compliance Risks Inside and Out
- What You Can't Do Yourself, You Can't Do Through Others
It is critical to have adequate policies and procedures in place to manage third-party ethics and compliance risks, and to monitor and update them on a regular basis.
Ethics and compliance have been with us at least since Moses and the Ten Commandments. Yet here we are in the 21st century, continuing to make headlines with ethics and compliance breaches leading to unprecedented fines and ever-longer criminal sentences. Investigations of corruption, bribery, fraud and money laundering are increasing while laws and regulations are being enacted or strengthened around the world—even in countries once presumed to be lax—with greater frequency, broader territorial reach and stiffer penalties for violators. Moreover, corporations are now being held accountable, not simply for their own conduct, but for the conduct of third parties with whom they contract.
What does this mean for leaders of manufacturing companies? It means addressing three aspects of corporate ethics and compliance that are critical for success in today’s global marketplace:
- Establishing and actively promoting a culture of integrity that is evident in every aspect of your company.
- Ensuring your company has adequate policies and processes in place to manage ethics and compliance risks.
- Understanding the extent to which you are accountable for the behavior of your business partners and preparing yourself accordingly.
Culture of Integrity
Regulators want companies to demonstrate a serious commitment, not merely lip service, to ethics and compliance. Manifestations of this commitment can be:
- A Code of Conduct that clearly articulates the company’s values and expectations.
- Demonstrably rewarding those whose behavior reflects the code, whether they are speaking up and raising concerns, or refusing to accept lavish gifts or entertainment offered by influence-peddlers.
- Demonstrably taking corrective action against code violations, such as conflicts of interest, fraud, or retaliation against people raising ethical or compliance questions in good faith.
A true culture of integrity also involves training and communications that are appropriately designed and evident, incorporating “acting with integrity” in a meaningful way into the performance objectives of managers and employees alike.
Adequate Policies and Procedures
As a strong corporate leader, you must take full and active responsibility for assessing risks based on your particular industry and the regions where your company is active. You also must identify risk areas, such as potential encounters with government officials, and have an effective program in place to manage business partners. This latter point is critical; you must recognize that the perimeter of risk does not stop at your company’s door.
Increasingly regulators in the U.S. and abroad are holding companies and executives accountable for their business partners’ illegal actions. Regulators are now of the opinion that what you can’t do yourself you also can’t do through third parties, and they no longer accept willful ignorance or benign negligence as an excuse. This may be one of the most significant changes in the ethics and compliance arena in recent years.