- THE MAGAZINE
In the current economic environment, companies are looking to fast growing emerging markets for business development opportunities. Whether looking to grow their market, finding cost effective sourcing partners or locating the next manufacturing facility, venturing into emerging markets — and some developed markets as well — adds new supply chain challenges and risk.
One significant area of risk that does’ not always get the attention it needs is corruption. This is an area being more closely evaluated today, due to growing legal consequences and potential impact on company and brand reputation
Globally, governments are establishing stricter laws to fight corruption and bribery. The U.S. Foreign Corrupt Practices Act (FCPA) and UK Bribery Act legislation are just two examples that raise the bar on company liability for corruption by third-parties. Enforcement of these laws is intensifying and the reach of these laws is impacting companies conducting business in multiple global locations.
The World Economic Forum’s Global Competitiveness Report indicates that corruption is the top obstacle to conducting business in 22 out of 144 economies. So, where does that leave you when you’re considering global expansion? How do you address corruption risk?
Before investing in new emerging market endeavors, make sure your eyes are wide open to potential supply chain corruption risks. To achieve this level of risk visibility, conduct a corruption risk assessment. This is an evaluation of the existence and extent of corruption and its impact.
In addition to companies that specialize in risk assessment, a global logistics service provider (LSP) with its own network of offices in emerging markets and an established anti-corruption policy can assist with evaluating and addressing corruption risk. Many third party logistics providers with knowledge of the local market and experience delivering logistics services in the region already have valuable insight into what corruption risks may arise.
As a global logistics provider and a division of the A.P. Møller–Mærsk Group (APMM), Damco has well-documented, transparent anti-corruption policies providing guidance and standards of conduct for the logistics services it performs on behalf of its clients and in managing third-party supplier relationships in global markets. These policies include due-diligence guidelines and materials that direct Damco personnel when selecting business partners and suppliers.
Anti-corruption policies are especially important today due to global regulations concerning indirect corruption performed by third parties, such as agents, suppliers or distributors. It is not enough to have a corporate anti-corruption policy; LSPs acting on a company’s behalf should also have matching policies.
The United Nations Convention against Corruption and Organization for Economic Co-operation and Development (OECD) Anti-Bribery Convention, both supported by a wide-range of signatory countries, also forbid this form of indirect corruption.
Anti-corruption policies (and those of LSPs) should clearly state how corruption will be addressed and how to prevent, plan for and respond to this risk area when entering a new market.
Within APMM, for example, the anti-corruption policy includes in-person training, a group-wide whistle-blower system and compliance with new legislation.
The whistleblower program provides a reporting system for employees confronted with corruption.
As a result of established policies, training and visibility, local Damco offices in emerging growth markets are prepared to communicate openly and honestly to customers what the corruption environment is when situations arise that are accountable to the APMM corporate anti-corruption policy.
Local personnel are on the ground hiring and managing local suppliers, which allows them to directly communicate the standards of conduct as defined by the anti-corruption policy. This includes the consequences of not meeting those standards.
This contrasts with logistics management companies without staff on location, but rather working with independent agent networks in these emerging markets. This may result in less control and the inability to effectively prevent and respond to corruption situations.
Remember, before moving into one of the emerging markets, determine what corruption risks exist in order to effectively plan, monitor and respond to corruption risks. Partner with knowledgeable logistics providers with well-established anti-corruption policies; those providers add value and standards of conduct to any anti-corruption supply chain planning.
Through collaboration, effective anti-corruption planning provides the framework to reduce supply chain risk and liability.