The modern business climate all but demands that companies think, act, and sell beyond the national border of their headquarters. 

It is increasingly the case that parts, products, and services create global revenue streams. Supply chains blanket the globe, as does a vast array of third parties and vendors that can open doors to new and profitable opportunities and marketplaces. There are, however, inherent risks facing businesses that grow into emerging markets and developing countries. 

We all know the big, scary problems: military conflicts, militias controlling and profiting from supply chains, government corruption, and, of course, public officials and “business agents” seeking to fill their wallets with bribes. Also, only a foolhardy enterprise fails to acknowledge the foreign expansion risks falling under U.S. enforcement of the Foreign Corrupt Practices Act.

At last week’s Compliance Week 2018 conference in Washington D.C., experts weighed in on how to overcome language barriers, cultural differences, and legal hurdles as they promote compliance and ethics best practices in new territories. Moderating the panel was Claudia Dumas, president and CEO for the Coalition for Integrity, a non-profit focused on combatting corruption and promoting integrity in the public and private sectors.

Panelists included Pascale Dubois, vice president for integrity for the World Bank Group, an international financial institution that provides loans to countries of the world for capital projects, and Laurie Waddy, global head of compliance for Bilfinger SE, a European company that specializes in civil and industrial construction and engineering.

Dubois described various ways the World Bank is doing its part to spread ethical business standards and practices around the globe.

Doing so, she said, is a necessity born from its oversight of the many different contracts and projects it funds in developing Nations. With one example, she described how substandard wiring provided by a contractor skimped on copper, corner-cutting that created a fire and explosion hazard. In other deals, there were water pumps that wouldn’t pump, incubators that wouldn’t warm, and educational programs without books. 

In following up on unmet contractual obligations, thievery and corruption are not uncommon discoveries. “You can see why the World Bank, as an international organization, started getting really interested in the fight against fraud and corruption,” Dubois said. 

While the World Bank is not a government agency, it nevertheless has its own enforcement tools, notably the ability to sanction and debar companies that fail to meet standards imposed by its Group Integrity Compliance Guidelines. 

“If there is corruption we have the jurisdiction to investigate this misconduct,” Dubois said of the World Bank’s sanctions board. “A debarment means that a company will no longer be able to receive a new contract and it is also debarred by other multilateral development banks. It can take a big chunk out of a company’s business.”

Dubois said that, about six years ago, the World Bank developed a new policy aimed at encouraging best practices. Debarred companies can seek to shorten their punishment by putting in place a compliance program to show that it will no longer engage in corruption.

“By imposing a sanction and, at the same time, a compliance program we are pushing this notion of compliance out to countries where, in the past, you might not have seen a compliance program,” Dubois said.

The World Bank’s Integrity Compliance Guidelines incorporate standards, principles and components commonly recognized by many institutions and entities as good governance and anti-fraud and corruption practices.

Among the requirements:

Safeguards, practices, and procedures should be adopted to detect and prevent not only corruption, but also fraudulent, collusive and coercive practices;

Companies must conduct properly documented, risk-based due diligence on business partners (including to identify any beneficial owners or other beneficiaries not on record) before entering a relationship;

Parties must seek reciprocal commitment to compliance from business partners;

If business partners do not have an integrity compliance program, they should be encouraged to adopt a robust and effective program;

The execution of all contracts must be monitored to ensure that there is no misconduct;

Companies should establish and maintain an effective system of internal controls comprising financial and organizational checks and balances over the party’s financial, accounting and recordkeeping practices, and other business processes; 

Employment and business partner contracts should include a contractual right of termination if the business partner engages in misconduct; and

Retaliation-free whistleblower reporting lines should be available to all employees.

Waddy approaches compliance in emerging markets on multiple fronts.

“There is no substitute for resources. I’m a big believer in that if you want to have an effective compliance program in certain countries or regions, you need to have boots on the ground. That’s not to say you need to have a compliance officer in every country, but you need to have somebody who is familiar with the local customs, language, and maybe even local legislation. You need to have people on the ground who are also loyal to the headquarters. Having solid-line reporting for your compliance organizations is really critical.”
Laurie Waddy, global head of compliance for Bilfinger SE

 

“I generally think about it in two buckets,” she said. “On one side you need a very practical approach to compliance, one that may be a little bit contrary or not-so-familiar for compliance professionals who have a legal background and are often thinking about liability. Some of the problems you deal with in emerging markets, however, are really basic. You are not always talking about grand scale corruption. Sometimes you are talking about very simple things that people simply need help with.”

Waddy adds that she often sees corporations where “people get too wrapped up in their compliance management system … the policies and procedures, the checking, the monitoring, the box ticking, whatever.” 

“The people we are dealing with are generally well educated, and I think we owe it to them to explain a bit more of the context,” she adds. “One of the first things I often do is give the managers a better understanding of the global situation and why we care about bribery and corruption. I’ll explain that what other countries agreed to. They often don’t realize the level of international cooperation there is. We take for granted that other people had the same level of global knowledge that we have. Personally, I feel that giving people a higher level of awareness goes a long way if you want them to be a certain way.”

Building trust, Waddy says, is often a key problem to overcome when entering a new geography.

“There is no substitute for resources,” she says. “I’m a big believer in that if you want to have an effective compliance program in certain countries or regions, you need to have boots on the ground. That’s not to say you need to have a compliance officer in every country, but you need to have somebody who is familiar with the local customs, language, and maybe even local legislation. You need to have people on the ground who are also loyal to the headquarters. Having solid-line reporting for your compliance organizations is really critical.”

“It is Important to have visibility, and to show it is important to the organization, and to give confidence to local management teams,” she added.

Pascal says building trust can be accomplished when “people know they can call you.”

“What is really important is that when they call, you can actually give them a solution,” she added.

Waddy warns that company rules and policies need to be considered alongside local customs and traditions. She gave an example of one ethical dilemma: What to do when a community leader, probably a public official by strict definition, sends someone to ask for a donation toward the funeral arrangements for a community member.

“When we in corporate put out a ‘no cash’ rule people take that pretty seriously,” she said. “They don’t want to violate the rules, especially if you have an effective program where people have seen that you are actually going to enforce the rules.” 

Nevertheless, there are more nuanced situations, like the funeral assistance request, that may not be a quid pro quo.

“You, of course, need to be a good community member, especially if you are the main employer in some of these locations,” Waddy said. “We shouldn’t underestimate the challenges that are faced by our employees, even when we are making rules that seem very clear, obvious, and easy-to-follow.”

When there are on-site problems, Dubois says the World Bank has both advantages and disadvantages when compared to a governmental agency, like the U.S. Department of Justice.

“We envy the fact that they have subpoena power and they envy the fact that we can jump on a plane,” she said. In the place of subpoena powers, however, she does have contractual audit clauses that give the World Bank the right to interview personnel and have access to books and records.

The panelists also dove into the knotty problem of what other nations may see as U.S. hypocrisy, given a perception of political scandals and pay-to-play government agents. 

 “People point to the amount of money that is in U.S. politics,” Waddy said. “That is something I need to address head-on. You try to be as honest as you can about areas that are less than perfect. At the end of the day, the goal is to eradicate corruption, wherever it may be. 

“Nobody has a monopoly on best practices,” Dumas, the moderator, added. 

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