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Why corporate compliance is vital when doing business overseas

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One of the biggest challenges of international business is corporate compliance.

Whether entering new markets or adapting to regulatory changes in established markets, compliance can be a minefield for even the most diligent of operators.

Corporate compliance relates to how a business adheres to laws and regulations and it encompasses corporate governance, regulatory compliance, ethics and risk management.

Corporate compliance is fundamental on many levels – adherence to a robust policy helps to avoid criminal charges and provides protection should you undergo an external investigation for not adhering to laws or regulations.  

Compliance is also inextricably linked to a positive corporate reputation and maintaining stakeholder trust - employee and public confidence can be rapidly lost if organisations are involved in contentious court cases or governmental investigations.  

It also relates directly to productivity and the wellbeing of employees, for example, internal compliance helps to ensure that staff issues and complaints are handed fairly and consistently.  

Corporate compliance differs in each country whereby there is a unique government, set of ethics, codes of conduct and local law enforcement agencies.  

‘Corruption is a very real burden’  

Elaine Dezenski, Senior Director from the World Economic Forum says: “Companies who are conducting business overseas face growing legal and reputational risks.  

These risks have become even more important because of increasingly complex business regulations worldwide, mounting pressure from regulators, enforcement agencies and civil society, and a dramatic increase in levels of business carried out in higher risk jurisdictions.”  

We only need to look at the recent scandal relating to the dubious expense claims by Australian MPs where they were apparently claiming to attend weddings to see that corruption can happen in every country.  

Indeed, according to the 2013 Global Corruption Barometer, the findings are clear: “Corruption is a very real burden with more than one out of four respondents reporting having paid a bribe during the last year.  

When people are not in a position to afford a bribe, they might be prevented from buying a home, starting a business or accessing basic services. Corruption can, and often does, infringe on fundamental rights.”  

A typical day in a global corporation involves thousands of transactions, in abundant locations across various languages, all while adhering to a set of cross border laws and regulations.  

If you are conducting international business and your organisation has a presence in multiple markets, it is imperative that you understand the compliance risks in each country.

Risk cannot be totally eliminated through due diligence, however, it will help you to make more informed decisions. Here are some key considerations if you are refining your global corporate compliance strategy:  

Undertake a thorough risk assessment  

As part of the risk assessment, you may investigate past, present and predictable future business interactions and you can evaluate each country your organisation has a presence in to assess which public institutions and governments are most bribery prone.  

You will also need to understand the underlying motivations in each market, for example, some countries will have a reputation for relying on payouts because governmental salaries are insufficient to meet basic needs.  

It is helpful to develop a checklist that can be used to evaluate all markets, which will for example, assess your relationship with the local government, review the role of third party consultants and analyse local data collection.  

During your assessment, you will also need to ensure that you are asking open questions so you can obtain the necessary feedback and refine your strategy accordingly.  

You also need to remember that thorough due diligence can take time and you therefore need to support the process with sufficient resources and set realistic timeframes.  

Engage third party consultants 

To avoid being held liable for corrupt third-parties, the US Department of Justice encourages companies “to exercise due diligence and take all necessary precautions to ensure that they have formed a business relationship with reputable and qualified partners and representatives.”  

Indeed, on the ground support from reputable local consultants can also provide valuable insights about local compliance regulations and procedures.  

With this in mind, you also need to consider that under many legal frameworks, global organisations may be held liable for acts of corruption by third parties.  

Therefore, before entering into a relationship with third parties, you need to take active steps to ensure that corruption risks are evaluated and you have determined that your partners can be expected to comply within ethical business parameters.  

Understand local market customs 

You need to have an understanding of local customs and nuances in each market and engaging a third party consultant may be particularly helpful at this stage.  

Having a deep understanding of people, their value systems and local corporate and governmental trends will help you to conduct ethical business.  

For example, in China it is common for people to employ family members. This may be considered nepotism in other markets, but it is important to have an understanding that the underlying preference usually relates to trusting family members over other employees.  

Be realistic and clearly communicate your expectations 

It is possible to conduct ethical business in every country, but you need to evaluate how to reconcile local business practices in order to avoid local corruption. It can be timely to conduct ethical business and in India, for example, failure to pay facilitation payments can provide significant delays as the person you are interacting with will want to provide you with a number of opportunities to pay a bribe.  

You therefore need to ensure that you set realistic timeframes in such markets to allow for the roadblocks that will challenge your adherence to ethical business processes. News_Final_Why corporate compliance is vital_BarryThomas

Communicate and reinforce your corporate value system 

Ethical awareness for all staff is imperative – each employee, regardless of where they are located, needs to have a consistent set of corporate values that can be applied.  

It is your responsibility to clearly communicate the Company’s expectation that every person must comply with the set of governing rules and to reiterate that there are no exceptions.  

The messaging may highlight that the core Company belief system overrules everything, including project timelines or indeed conflicts with local community beliefs.  

A robust and well communicated policy will empower employees and will help to avoid misinterpretation. You should also consider hosting your Company policy online so all employees can access the universal guidelines.  

Implement a compliance education program in all markets  

It is your responsibility to educate all employees and a robust training program will subsequently protect your organisation.  

It may be worthwhile nominating a global Chief Compliance Officer and a local compliance Manager in each market to manage, monitor and report on local compliance and ensure that all staff are kept abreast of changes in the regulatory landscape.  

The implementation of a robust compliance strategy and corporate policy document plays a significant role in protecting the welfare of employees and stakeholders.  

The pressure of adhering to laws and regulations can cause stress, particularly for individuals who strive for perfection. 

A robust compliance policy will not only empower employees to speak out against corruption, but it will also reassure them that ethical and compliant business interactions are always the highest priority for the organisation.  

Barry Thomas is the Vice President and APAC Managing Director of Cook Australia. Barry has more than two decades of international leadership and expertise in the pharmaceutical and medical device industries and he currently spearheads the world’s fastest growing region for Cook Medical. His current position sees him working to expand the opportunities for people in Asia to access Cook Medical’s advanced and minimally invasive medical devices. This article was developed with the contribution of Mandy Horne, APAC Corporate Affairs Manager at Cook Medical Pan Pacific

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