Given the recent push for better corporate governance and compliance issues, it is now more important than ever that companies begin to carefully scrutinize the dealings of their business partners for signs of unlawful activity. All too often, companies will look the other way when it comes to the business practices of their partners, seeing this as none of their concern and believing that the actions of these partner organizations having nothing to do with their own ethical dealings and can therefore have no negative consequences for themselves. This is wrong. Also, far too many companies will foolishly take these partners at their word when told that their dealings are being conducted ethically and within government regulations. However, by not taking these issues more seriously, many companies are putting themselves at great risk.
The whole point of the Foreign Corrupt Practices Act (FCPA) is to ensure that no U.S. corporations resort to the bribing of government officials as a means of gaining favors and advantages. Also, other laws and regulations have recently been enacted both in the U.S. and abroad to further stress this issue. As a result of these regulations, most companies have taken these matters into consideration when developing and implementing their compliance and risk management programs. Unfortunately, as simple as this issue may sound, it is actually far more complex than most realize, the primary complication being the use of third party organizations which may be brought on to work for a company. While many companies may have measures in place to prevent misconduct within their own organization, these same organizations frequently overlook the fact that the third party partners they hire out to are not held within these same programs, and may not have such a program of their own.
While in the past, it was primarily freight forwarders and agents that were the focus of most companies’ compliance programs, recently it has become the suppliers who are being most carefully examined as major compliance risks. This has resulted in many suppliers being required to enter into contracts which grant protection to the customer, as well as allowing the customers to conduct their own audits of the supplier’s business. Questionnaires and background checks are also being used as due diligence to ensure a partner’s reliability. However, conducting these lengthy and detailed examinations of each and every third party organization that a company does business through is a time consuming and expensive process, and to conduct these compliance checks to the satisfaction of the government regulators is impractical if not impossible.
In order for a company to avoid overreaching their means in conducting the proper due diligence on third party partners, the most efficient means of carrying out these duties is through careful risk assessment. By assessing the potential threat level of each third party organization, companies can pick and choose which partners merit a thorough examination, while letting non-risk partners by with little more than a cursory glance. Also, alternatively, companies can hire out the services of risk assessment firms to conduct the more difficult compliance evaluations. It is also important to keep in mind that companies who can demonstrate that they have made a good effort to conduct themselves within the regulations of the FCPA, are unlikely to face severe consequences should a third party compliance breach occur.
Published by Conselium Executive Search, the global leader in compliance search.
