Corruption

Managing anti-bribery and corruption compliance in energy and natural resources

The Growing global challenge of managing anti-bribery and corruption compliance

Companies in the energy and natural resources (ENR) sector face an increasingly complex operating environment around the world, not least in the field of compliance – and especially in the area of anti-bribery and corruption (ABC). As ENR companies push further into lesser known geological regions, risks proliferate and become more difficult to measure. Companies are continuing to expand into a growing number of countries whose politics and societies make it exceedingly difficult to calibrate an effective ABC compliance framework. Falling commodity prices have exacerbated the challenges faced by compliance functions as they compete with other parts of the business for scarce funding. Two factors are creating new compliance risks for ENR companies. First, a growing number of governments around the world are tightening ABC regulations or introducing new ones. Second, as companies globalize their operations, they rely more heavily on third parties than before to do business in far-flung parts of the world, often in areas where there is a high risk of corruption.

The potential cost of failing to comply with ABC regulations somewhere in the world is significant: sizeable fines, the possibility of imprisonment, and the loss of corporate reputation. But it is expensive to create a framework to prevent, detect and respond to corruption. At a time of weak commodity prices, ENR companies face severe cost constraints in implementing, maintaining or enhancing a framework to mitigate the risk of non-compliance. However, by taking the correct approach to the problem, organizations are able to develop a fit-for-purpose compliance framework that manages the risk without breaking the bank. In order to assess the risk of ABC compliance, KPMG conducted a survey of 659 executives in a range of functions and industries from around the world. Fifty-four (8 percent) of these work in the ENR sector (of whom 38 work in oil & gas). All were asked a series of questions about the most challenging aspects of ABC compliance, and the oil & gas executives were given additional questions specific to their industry. The findings presented in this report are taken from the responses of: the oil & gas industry; the ENR sector including mining; and all 659 executives.

“A growing number of companies are finding it more difficult to deal with ABC issues, because of their complexity, increasing globalization of their operations and the need to deal with these matters in many different jurisdictions”

The most striking finding of the survey is a sharp increase in the proportion of respondents in all sectors who say they are highly challenged by the issue of ABC, compared with a survey KPMG conducted 4 years earlier. In 2011, we asked executives in the US and the UK their views of ABC and were able to compare their responses to the responses of executives of listed UK and US companies in the latest research. More than double the number than in 2011 found it difficult to monitor and evaluate compliance. “A growing number of companies are finding it more difficult to deal with ABC issues, because of their complexity, increasing globalization of their operations and the need to deal with these matters in many different jurisdictions,” says Jimmy Helm, Global Head of Anti-Bribery & Corruption Services, KPMG in Czech Republic. “There’s a greater understanding of the issues faced, but this doesn’t mean they are easier to deal with.” “In reply to several enforcement actions in the US, multinational players in the ENR sector have, over the past 5 years, been actively driving ABC policy, compliance and training programs across their operations. With this accomplished to a greater or lesser degree, however, many of our ENR clients are experiencing an increase in reports of alleged breaches. This is placing a burden on resources to be reactive in investigating the reports and to be less proactive in monitoring and detecting ABC violations. The need for technology and data analytics to assist in the detection (and prevention) role is therefore something we see as an emerging trend in the sector,” says Roy Waligora, Global Forensic Sector Leader, ENR, KPMG in South Africa.

Download the full report, The growing global challenge.

David Okwara

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