Principles for Countering Bribery SME

Much of the world’s business is carried out by small and medium enterprises, especially in  emerging economies. The SMEs in many societies are frequently confronted with the problem of bribery. As  smaller companies with limited resources SMEs face challenges in resisting and countering such pressures. Also, there are growing requirements made by large international companies for their  suppliers to show evidence they have appropriate anti-bribery policies and systems in place.

Countering bribery is good business practice. It can help build reputation, especially with customers, and it can reduce risks. By building strong anti-bribery cultures SMEs can successfully challenge and resist bribery.

STEP 1  – AGREE YOUR PRINCIPLES

This first Step is making a firm commitment to counter bribery by setting out your business values to:

  • Conduct business fairly, honestly and transparently;
  • Not make or offer, bribes, whether directly or indirectly, to gain business advantages;
  • Not accept bribes, whether directly or indirectly to give businesses advantages;
  • Develop a Programme to implement and support these

Principles.

THE CULTURE FOR COUNTERING BRIBERY IS SET FROM THE TOP

It is important that your Board, if you have one, partner, manager or owner, depending upon your size and structure, are firmly behind this commitment and are seen to be active in its implementation, as this involvement will set the business culture which comes from the top. By adopting an anti-bribery Programme, you are also taking steps to protect your business and your people.

The important point here is that the decision to adopt an antibribery Programme is recorded in writing. The importance of records is that they show your intentions, what you wanted to do and why. If ever you need to, you then have the means to protect your business against charges of bribery. As a small organisation you do not have to publish reports like large companies, so just keep a book or file in which you have recorded your decisions.

Your business irst needs to look at its own situation through a quick assessment of risk.

STEP 2  DEVELOP YOUR PROGRAMME

A Programme for countering bribery will also add to your reputation and will give your business an advantage with large companies looking for suppliers. It will also help you to minimise risks to your business, such as legal penalties and fines. You now need to put your Programme into effect. Agree what to do to minimise the risk from bribery for your business. This will give you the scope of your Programme. You will need to spend some time on this step. Start with the following two actions:

DECIDE WHO SHOULD BE INVOLVED

This will depend upon the size of your organisation. If you have a Board, it might appoint someone to be responsible for implementing your Programme.  If you are a smaller organisation with just a few people, it may be better for everyone to discuss and agree together how to run your Programme.

It is important that leadership comes from the top, but everyone should take responsibility.

DECIDE THE SCOPE OF YOUR PROGRAMME

Fundamental to countering bribery is understanding and recognising the various guises in which a bribe may come, and having in place processes for dealing with each. Consider how each form of bribery may impact your business and prioritise accordingly.

Bribes

In its simplest form, a bribe is an illegal transaction, where someone is abusing their position for personal benefit. It is usually a sum of money, but can be a benefit, given or received in order to gain an advantage. Benefits can be hospitality, gifts or a favour. Inducements may not even take the form of a direct bribe, but an indirect approach. They can influence judgment and place employees in a compromised position.

Gifts, Hospitality and Entertainment

Gift giving is an accepted practice in most countries but it can be open to abuse and may be used as part of a process of preparing for larger bribery, so it is important that you think about what you want your business to do about gifts. It is sensible to control both the giving and accepting of gifts so that there is a consistency in your approach. At what point does a gift start to create an obligation and influence judgment? Chocolates or a pen may be fine, but what if the pen is gold or the gift is a pearl necklace valued at  Rs.1,00,000?

If a business partner invites you to a dinner or to a social event which their company is hosting for business purposes or simply to further good relations, that is entertainment and acceptable providing it is not lavish. A meal in a local restaurant once in a while is fine. Dinner with expensive food and an overnight stay with spouses at a five star hotel is lavish.

Entertainment and gifts, if regularly accepted, can compromise and put you in a position where you are no longer free to use good judgment. Imagine having to tell a supplier that their standards are slipping or that you no longer want to buy from them, when you have just accepted from them tickets to a concert, which are very difficult to obtain. Again, you should decide on what is right for your business and how it should be approved.

Business Travel Expenses for Customers

There may be occasions when your business wants to invite customers to a particular business event or to visit a factory or see an installation of a system. Equally, you may be invited by a customer. In both cases it is better that each meet their own travel expenses, unless there is a contractual agreement such as to give training on a product, where the travel costs are part of the agreement.

Facilitation Payments

Facilitations payments, sometimes known as “grease” payments are generally illegal. These are small amounts demanded by providers of services to secure or ‘facilitate’ services to which you are entitled, such as connecting a telephone or obtaining a visa. Equally, they can be inducements that are offered by business people to customs, immigration and other officials to ‘jump the queue’ or ‘speed up’ the granting of services and permits. Either way they should not be offered or paid. If facilitation payments are demanded or paid under duress, then record them and let your manager know.

Favours

As a small business, you will probably know and be well known by your business associates, and good relationships will be a valuable part of your business life. For the most part giving or accepting a favour will be a straightforward expression of good will. Just keep in the back of your mind that favours incur obligations which in turn may put people into situations where their judgment is impaired and they may not act in the best interests of the business. Such favours may not always be straightforward, and could conceal dubious motives. For example, writing a letter of invitation to help someone get a visa to visit your country, could make you their sponsor and liable for whatever they to whilst in your country. Contract Payment

Terms

This seems very obvious, but you should be able to give clear commercial justification to all the payment terms in your agreements. The better everyone in your organisation understands the business policy on payment terms, the less likely you are to encounter ambiguous agreements. Commission fees should be balanced by measurable business value. Services supplied to your business by third parties should be clearly recorded and the terms understood. Payments need to be made in accordance with relevant tax

laws. Payments should be made in the countries where the business takes place, and not offshore. They should be by cheque or bank transfer and not in cash.

Political Contributions

Businesses may see the giving of donations to a political party as a way of contributing to the democracy of their country. Donations might be to party funds, or to help support an election campaign. They may be made to national parties or local initiatives. The granting of paid leave of absence to an employee (in addition to holiday allowance) to support a political group, perhaps in an election, may be regarded as a political contribution made by the business. If you decide to make a contribution, record it in writing and ensure the accounting is transparent.

You should not make contributions to a political party whilst in negotiations with a government over business, licenses, or any matter which affects your company.

Charitable Donations

Bribes may even be disguised as donations to charity. If your business wants to make a donation, you should set out some simple guidelines to follow. A genuine charity will generally be registered under the local country’s laws. Be careful who the charity officials are. Be wary if you are asked to give a donation to a particular charity as part of a business agreement. If you are engaged in a business bid and a customer has a connection with the charity or sponsored organisation, then you should not promise or make a donation or sponsorship until the contract decision has been made. Money should always be given to a charitable organisation and not to an individual.

Sponsorship

A business sponsors an organisation such as a sporting club, when it pays for the right to use the name of that club for its business purposes. For example a business making sports equipment could benefit from linking its name to the stars in that particular sport. In this case money may well be paid to an individual, but make sure there is an agreement in place which outlines what your business is paying in fees and what you expect to receive in return.

Conflicts of Interest

A conflict arises where personal interest is put before that of the business. An example might be when one of your business team has a cousin who runs a decorating business and who will give you a good price to do some work on the office. Providing the personal interest is declared, the selection process is transparent, and the business side is handled by someone other than the family member, no conflict arises. Your business should set out clearly how it wants to handle conflicts of interest and potential situations so as to avoid conflicts before they take place.

STEP 3 IMPLEMENTATION

Whatever organisation you have decided upon, it is very important that direction is seen to come from the top, i.e. the Chairman of the Board, the General Manager or simply the ‘Boss’. It is key to the success of the Programme that everyone is involved and individually responsible and it is not a case of ‘do as I say’.

In adopting your Programme, you are undertaking to do business with integrity. This also impacts on others in your business orbit, i.e. employees, suppliers, contractors, and customers. It is no good agreeing not to pay or receive a bribe if your suppliers are doing it for you. It is therefore essential that everyone involved is aware of your the Principles and Programme. Employees or those working in the Business make sure everyone understands why you are doing this and the risks involved in not having an anti-bribery Programme. Everyone should understand that they have an individual responsibility to implement it. Every employee or person working in the business needs to be aware of and understand the Programme. The anti-bribery Programme can be set out in a simple, easy to understand document given to each of your people.

It is equally important that your people know they will not be penalised if they walk away from a business opportunity where it is dependent upon bribery.

Business Relationships

This is one of the most important parts of your Programme and possibly the most difficult to implement as it involves other organisations and is less within your control, i.e. agents, contractors, suppliers and customers.  First of all make sure that those with whom your company has a business relationship are informed of your anti-bribery Programme. Business partners should understand that your anti-bribery Programme also applies to them when doing business with you and on your behalf. Reflect your Programme in the terms of your contracts and agreements, which should also allow for immediate termination if business partners pay or accept bribes.  If you enter into a joint venture, make sure your Programme forms part of the business relationship.

STEP 4  RAISING CONCERNS AND SEEKING GUIDANCE

How you decide to deal with concerns and the giving of guidance will depend on your size and organisation. To help you, here are some points for consideration:

  • Your Programme should be seen as an ‘evolutionary process’, i.e. one which is continually developing.
  • People need to feel able to discuss issues without fear of reprisal;
  • Business partners may also have issues to raise;
  • This is the point at which problems can be identified and dealt with early, providing they are recognised in time;
  • Confidentiality will probably be important when considering how to handle reports of incidents of bribery and discussion on conflicts of interest. Always find out the facts before taking action.

COMMUNICATION

Implementing your anti-bribery Programme is very positive for your business, so make sure it is well communicated. In addition to the initial communication to employees and business partners, make sure to keep it current with people new to your business and your business partners. Post your anti-bribery Programme on your website if you have one.

INTERNAL CONTROLS AND MONITORING

Anti-bribery strategies are only as effective as those who implement them. Your business should consider what processes will best control your Programme and what checks and balances are needed to monitor them. A business of any size needs certain internal controls such as having more than one signature on the cheques, controlling expenses and signing off orders. Some points to take into consideration are:

Ÿ Financial controls (including internal accounting controls) are essential and when correctly implemented will pick up irregularities. Transparency and accuracy, including filing and retention of essential documents, are key;
Ÿ Contract terms, if well monitored, will highlight lack of transparency in payments or practice;
Ÿ Good management will identify irregularities with gifts, entertainment and expenses;
Ÿ Employee relations and company policies if well maintained will encourage openness and compliance;
Ÿ Example from the top sets the culture of the organisation;
Ÿ Regular review of the Programme is essential, perhaps have it as an agenda point on your Board or business meeting agenda;
Ÿ Accurate written records should be kept and available for inspection;
Ÿ Controls only work if processes are followed.

CONCLUSION

These guidelines are intended to help you implement your anti-bribery Programme which addresses your structure, business and risks. The suggestions made are to help you focus on the issues so that you may decide how best your business can address them. The key to developing an effective Programme for countering bribery lies in:

Ÿ Recognising the benefits to your business;
Ÿ Identifying the risks & agreeing a process to lower the risks
Ÿ Communicating your Programme to your employees &  business partner
Ÿ keeping clear, accurate records, not only financial, but also of your decision to adopt your Programme and all your processes for countering bribery;
Ÿ Encouraging open discussion  & Dealing effectively with incidents and concerns raised
Ÿ Continually reviewing your Programme for effectiveness.

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