The Other CPO Compliance Mandate: FCPA

Traditionally the word compliance in procurement addresses metrics such as spend under management and minimizing maverick purchases across the company to get the most out of negotiated agreements.
 
While this compliance is as important as ever in reducing costs, today’s CPO and procurement team play a critical role in their organization’s broader enterprise compliance and risk management framework, primarily because procurement represents the supply chain which can materially impact the business, as mentioned in our previous blog: No Supplier is too big to fail. 

In recent years, chief executives have been faced with an increased number of compliance and regulatory burdens including the enforcement of anti-corruption compliances - a global business area quickly gaining headlines. Amongst the many anti-bribery and corruption laws multi-nationals must comply with are:

• Foreign Corrupt Practices Act (U.S.)
• UK Bribery Act (UK)
• Corruption of Foreign Public Officials Act (Canada)
• Prevention of Corruption Act (India)

The FCPA is a forty-year-old US law which has seen a dramatic increase in DOJ and SEC enforcement actions over the past decade. Failure to comply with FCPA regulations have led to fines reaching hundreds of millions of dollars and even jail time served by senior executives.  

Global firms increasingly rely on suppliers and other 3rd parties (agents, consultants, partners, etc.) to reduce costs, increase scale and provide more flexibility, however 3rd parties bring a unique risk as well.

Deloitte calls 3rd parties the Achilles Heel of FCPA compliance, noting that enforcement actions by the DOJ and SEC involving 3rd parties increased from 42% of those filed in 2005 to 100% of those filed in 2011. 

CVM Solutions’ sister company – Kroll Advisory – supports its clients’ global anti-corruption compliance initiative with a proven solution comprised of system design, prevention and remediation.  In its work with multinational procurement leaders, CVM Solutions is seeing a surge of compliance initiatives recognizing procurement’s role in FCPA 3rd party compliance.
 

Email, Excel and Paper, Oh My!

Last year Kroll Advisory surveyed 139 compliance executives at multi-national companies around anti-bribery and corruption risks and compliance initiatives in place at their respective firms. The resulting study results were published in the 2012 FCPA Benchmarking Report.
Compliance respondents indicated that the greatest challenge they face is anticipating regulator’s next moves. Among the other findings in the report:

• 50% of respondents expect an increased bribery risk exposure in the future
• 3rd Party represents the domain with the greatest exposure to the business

However, despite the risk represented by 3rd parties, the majority of firms lack a technology platform to automate compliance, relying instead on paper documents, email, Excel, etc.

Kroll’s FCPA offering addresses 3rd Party with a proven framework including four components:

• Risk segmentation
• Sanctions & regulatory checks
• Purpose-built technology platform
• Global due diligence

For more insight into the intersection between compliance and 3rd parties, download the report here  and  reach out to your CVM Solutions (cvm@cvmsolutions.com) or Kroll Advisory Representative directly for more information.