Avoid Corruption in Holiday Gift-Giving

With Thanksgiving and the holiday season upon us, gift-giving and compliance can be an issue for global companies, especially since more than 20% polled by Deloitte said their companies don’t assess the corruption risk of employee gift-giving.

While 20.4% of respondents don’t assess employee gift-giving corruption risk, more than 43.4% expect anti-corruption enforcement to rise in 2016, moneyaccording to a recent Deloitte poll of more than 1,600 professionals.

“As generous as the holidays make many feel, giving gifts that could be seen as bribes to non-U.S. government officials can result in fines, regulatory action and brand damage for multinational organizations,” said Bill Pollard, Deloitte Advisory partner at Deloitte Financial Advisory Services LLP. “Now is the time to conduct gift-giving compliance training and increase efforts to help ensure anti-corruption compliance through the holiday season. As global enforcement continues to increase, take a note from regulators and make sure your corporate records around travel, gifts and entertainment are transparent and show no ‘corrupt intent’—particularly when out-of-country government officials are recipients.”

The poll results found that anti-corruption policies for giving gifts to non-U.S. government officials run the gamut: 18.2% maintain a no-gift policy and provide no gifts to customers, 16.4% give only small company logo items, 15.7% restrict gift value and 6.1% use separate policies for non-U.S. government officials compared to other customers and third parties.

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The poll also found that 43.6% of companies plan to make improvements, while 12.7% do not and 43.7% do not know.

To uncover irregularities that point to corrupt intent and bribes disguised as gift-giving, some compliance, legal and internal audit teams use visualization and analytics tools. However, just 8.4% of respondents said their organizations effectively use visualization and data analytics technologies to support anti-corruption efforts. A full third of them (33.1%) didn’t use the tools at all.

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Leading practices to prevent and detect corruption in gift-giving include:

  • Set ground rules clearly — Describe the nature and type of acceptable gifts, payments, travel and entertainment. Escalate all gifts for government officials to compliance for review. Create an approval process with aggregate dollar limits. Define the disciplinary process for non-compliance.
  • Act globally — Ensure that rules are consistent not only with U.S. laws but local laws and customs. Translate that guidance into all appropriate languages in which your organization operates.
  • Keep gifts corporate — Give gifts that feature company logos, reflect the organization’s products and ensure they are intended for official — not personal — use (such as a business card holder).
  • Make gifting inclusive — Give gifts publicly and transparently, and involve teams as opposed to individuals (such as specialty baked goods for a team to share)
  • Prohibit cash or its equivalents, such as gift cards.

“Anti-corruption visualization and analytics tools can help address varied global anti-corruption laws and gift-giving customs, making multi-national anti-corruption management easier than before,” Pollard noted. “Nothing replaces the fundamental value strong anti-corruption professionals, policies and procedures do.”

What to Do About Reputation Risk

Of executives surveyed, 87% rate reputation risk as either more important or much more important than any other strategic risks their companies face, according to a new study from Forbes Insights and Deloitte Touche Tohmatsu Limited. Further, 88% say their companies are explicitly focusing on managing reputation risk.

Yet a bevy of factors contribute to reputation risk, making monitoring and mitigating the dangers seem particularly unwieldy. These include business decisions and performance in the following areas:

Financial performance: Shareholders, investors, lenders, and many other stakeholders consider financial performance when assessing a firm’s reputation.

Quality: An organization’s willingness to adhere to quality standards goes a long way to enhancing its reputation. Product defects and recalls have an adverse impact.

Innovation: Firms that differentiate themselves from their competitors through innovative processes and unique/niche products tend to have strong name recognition and high reputation value.

Ethics and integrity: Firms with strong ethical policies are more trustworthy in the eyes of stakeholders.

Crisis response: Stakeholders keep a close eye on how a company responds to difficult situations. Any action during a crisis can ultimately affect the company’s reputation.

Safety: Strong safety policies affirm that safety and risk management are top strategic priorities for the company, building trust, and value creation.

Corporate social responsibility: Actively promoting sound environmental management and social responsibility programs helps create a reputation “safety net” that reduces risk.

Security: Strong infrastructure to defend against physical and cybersecurity threats helps avoid security breaches that could damage a company’s reputation.

But brand crises make headlines with increasing frequency, and companies are laying responsibility at the feet of the C-suite, particularly chief risk officers. Deloitte reports that respondents considered the primary responsibility to rest with: the chief executive officer (36%), chief risk officer (21%), board of directors (14%), or chief financial officer (11%).

What can they do? The study offered these key points to consider when crafting a crisis management plan:

  • Don’t wait until a crisis hits to get ready. Monitoring, preparation and rehearsal are the most effective ways to get ready for a crisis event. Organizations that can plan and rehearse potential crisis scenarios should be better positioned to respond effectively when a crisis actually hits.
  • Every decision during a major crisis can affect stakeholder value. Reputation risks destroy value more quickly than operational risks.
  • Response times should be in minutes, not hours or days. Teams on the ground need to take control, lead with flexibility, make decisions with less-than-perfect information, communicate well internally and externally, and inspire confidence. This often requires outside-the-box thinking and innovation.
  • You can emerge stronger. Almost every crisis creates opportunities for companies to rebound. However, those opportunities will surface only if you’re looking for them.
  • When a crisis seems like it’s over, it’s not. The work goes on long after you breathe a sigh of relief. The way you capture and manage data, log decisions, manage finances, handle insurance claims, and meet legal requirements on the road back to normality can determine how strongly you recover.

But the real objective should be preventing these potential crises to begin with. Deloitte recommends exploring the possibilities of “risk sensing” – using real-time data to monitor the issues that might impact a company’s reputation:

Crisis management for C-suite executives

Check out the infographic below for more insights from the Deloitte Reputation@Risk survey:

Deloitte Reputation@Risk Global Survey

The Growing Problem of Supply Chain Risk

As the modern business world becomes more and more sophisticated, so too do the supply chains on which organizations rely. And as these supply chains have become more sophisticated and intertwined, the risk of possible problems has grown.

A recent report by Deloitte states that “Because of the importance of supply chain management to companies’ success, supply chain risk events are having a profound effect and becoming more costly.” The consulting firm surveyed 600 executives at manufacturing and retail companies to understand their perceptions of the causes and affects of supply chain risks. Some of the key findings include:

  • Supply chain risk is a strategic issue. There are now more risks to the supply chain and risk events are becoming more costly. As a result, 71% of executives said that supply chain risk is important in strategic decision making at their companies.
  • Margin erosion and sudden demand changes cause the greatest impacts. The most common and the most costly outcomes of supply chain disruptions are erosion of margins and an inability to keep up with sudden changes in demand, which illustrates the extent to which the supply chain risk issue affects the “heart of the business.”
  • Most concern about extended value chain. Executives surveyed are more concerned about risks to their extended value chain—outside suppliers, distributors, and customers—than about risks to company-owned operations and supporting functions.
  • Supply chain risk management is not always considered effective. Two thirds of companies have a supply chain risk management program in place, but only half the surveyed executives believed those programs are extremely or very effective.
  • Companies face a wide variety of challenges. Executives cited a wide variety of challenges including problems with collaboration, end-to-end visibility, and justifying investment in supply chain risk programs, among others. However, no single challenge stood out, indicating the need for broad approaches.
  • Many companies lack the latest tools. Current tools and limited adoption of advanced technologies are often constraining companies’ ability to understand and mitigate today’s evolving supply chain risks.

What’s alarming in this report is that even though companies are taking a proactive approach to managing supply chain risks, only about half of the executives surveyed believed their companies are extremely or very effective at managing supply chain risk, including just 13% who considered their companies to be extremely effective. However, when asked which strategies have been most effective, executives most often cited building stronger relationships, building business continuity plans and developing the ability to quickly adapt the production or distribution network.

In all, however, Deloitte’s survey did not reveal the most positive news for companies and how they manage supply chain risk. But if anything, executives can use this information to better understand the weaknesses in today’s supply chain environment. As we’ve seen with past catastrophes and economic troubles, the chain is complex and ever-evolving. Keeping up with changes and eliminating the affect of events is what true supply chain resiliency is.


3 Steps to Managing Reputation Risks

Henry Ristuccia of Deloitte has some good advice for companies that are still behind the times when it comes to managing reputation risk: identify potential threats and monitor them vigilantly. He also notes that companies should be sure to focus on the upside of reputation as well as the downside. Most companies already engage in marketing efforts to improve how stakeholders perceive them, and that’s key: studies have shown that, once a company’s reputation becomes rosy, it’s likely to stay that way.

Ristuccia explains.

A highly positive reputation is itself a tool in managing risks to reputation. The PR firm Edelman’s 2011 “Trust Barometer,” an annual survey that “measures attitudes about the state of trust,” found that, when a company is trusted, 51% of stakeholders will believe positive information about the company after hearing it once or twice. And only 25% will believe negative information after hearing it once or twice. Distrusted companies, however, fare poorly by comparison: only 15% of stakeholders will believe positive information about a company they don’t trust, and 57% will believe negative information after hearing it once or twice about such organizations. This study also linked trust to customer purchases, investor share purchases, and people’s recommendations to others.

Head over to RMmagazine.com to read the rest.