Bribery Act can bite

Posted on 1 Jul 2011 by The Manufacturer

One in four business leaders unaware of how technology can protect their company from expense fraud, says John Apthorpe, commercial director at data protection specialist Iron Mountain

As the day arrives when the Bribery Act comes into force, research by Coleman Parks for information management company Iron Mountain has seen that companies remain worryingly unprepared for the new legislation.

This is concerning in view of the fact that a glut of companies, from small businesses to large corporates, have faced humiliation, reputational damage and millions on pounds worth of fines following high profile cases of corruption. In one case, a well known organisation within the aerospace was heavily fined after using a network of more than 200 agents to bribe officials in at least six countries on four continents.

These findings should sound alarm bells across the manufacturing sector, particularly since evidence suggests that manufacturing is particularly vulnerable to fraud and corruption.

Our survey of 100 business leaders with responsibility for information management found that despite widespread media coverage of the new legislation and its implications for business, more than a third (36 per cent) of respondents were unaware of the Act; 30 per cent said their company did not have adequate procedures in place to prevent bribery from occurring; and less than half (48 per cent) understood the implications of failing to adhere to the new Act.

Is the manufacturing sector particularly vulnerable?

Well, the international and isolated geographical location of certain manufacturing operations and the high value of many contracts tendered for create an interesting dynamic.

It is vital that manufacturing companies review their anti-bribery and corruption frameworks, especially those organisations which have significant operations in developing countries. For example, the Act’s inclusion of a new charge of ‘failing to prevent bribery’ means that the business models often adopted by manufacturers in emerging and high risk economies, such as the use of sales and business development agents, indirect sales models and local intermediaries in logistical and production matters are likely to be subject to far closer scrutiny.

An apparent lack of clarity in the Act around ‘facilitation’ payments doesn’t help either as many manufacturing companies work in areas where that style of payment remains common practice.

But it is not all bad news. Much of the new Act is simply about common sense and responsible business practice. Information management really comes into its own here. Effective record keeping and a scrupulous approach to handling and storing documents goes a long way towards helping manufacturing firms to monitor business activities by employees and partners.

The introduction, management and communication of effective, company-wide anti-corruption controls is important – for most companies operating on any kind of scale automation of these processes will be essential but this is not an area commonly understood by business.

This complacency could represent a major missed opportunity for manufacturing companies – particularly since an organisation can successfully defend itself against a ‘failing to prevent bribery’ charge if it can demonstrate that it has put in place adequate procedures to prevent it.

My advice is to follow a few simple principles to protect your business:

1. Take paper out of the equation. Scanning ensures that supplier correspondence, contracts, agreements and other relevant documentation are converted into electronic format that can be stored securely (ideally offsite). This will help the business perform automated, on-going due diligence on all company transactions, focusing on the main areas of risk such as hospitality, promotional spend, expenses, and tackling problems before they occur or escalate.

2. Take people out of the equation. Automating invoice management ensures that all financial transactions are traceable and secure. Many firms are legally obliged to keep invoices and purchase orders for seven years. Digitising receipts, agreements and purchase orders and automating the business processes around the management of these documents ensures security and compliance.

3. Automatically back-up of all emails and other electronic communication. Looking for documents can be extremely frustrating. Having a professional and efficient data backup solution in place for business computers means that lost or intentionally deleted documents or emails can be rapidly recovered and all changes archived to deter inappropriate behaviour.