Gemma Aiolfi
Senior Advisor, Legal and Compliance
Gemma Aiolfi is Senior Advisor for Compliance and Collective Action at the Basel Institute on Governance. Gemma helped to establish the Basel Institute on Governance in 2003 alongside Prof Mark Pieth, former Chair of the OECD Working Group on Bribery, and served as the organisation’s Head of Compliance, Corporate Governance and Collective Action until October 2022.
Together with a team of compliance and Collective Action specialists, Gemma supports the Basel Institute’s extensive private sector work and outreach. This includes providing tailored guidance and training on anti-corruption compliance, corporate governance and crisis management to organisations of all sizes and sectors, and driving the use of Collective Action approaches to tackle corruption, raise standards of business integrity and level the playing field between competitors.
A barrister by training, Gemma studied Swiss law in Basel, Switzerland and holds a law degree from the London School of Economics and a postgraduate degree from Stockholm University in Sweden. Among other roles, Gemma has worked as Global Head of Anti-Corruption at Swiss bank UBS, and as Legal Counsel to the Integrity Department and internal Office of Special Investigations at ABB.
Gemma served on the OECD’s Working Group on Bribery in International Business Transactions and as an advisor to the UN Independent Inquiry Commission on the Iraq Oil-for-Food Programme. She is a Member of the Board of Ethics and Compliance Switzerland and of the OECD’s Trust in Business Initiative, a member of the Steering Committee of the Alliance for Integrity and a former External Council Adviser to the Board of Graña y Montero, Peru.
Her 2020 book, *Anti-Corruption Compliance: A Guide for Small and Mid-Sized Organizations* published by Edward Elgar, offers step-by-step guidance to companies and non-profit organisations in managing their corruption risks.
Publications
The B20 Integrity and Compliance Recommendations: An International Framework for Action
This article was published by Gemma Aiolfi and Scarlet Wannenwetsch of the Basel Institute on Governance together with Daniel Malan of Trinity Business School and Klaus Moosmayer of Novartis for California Management Review. The authors argue that businesses seeking to integrate compliance and integrity at the core of their business model would do well to look at the Business 20’s recommendations.
The authors explain how the recommendations of the B20 Integrity and Compliance Taskforce can act as a framework for action by businesses seeking to strengthen the G in ESG. Among the Taskforce’s recommendations: fostering Collective Action by actively collaborating with like-minded businesses and other stakeholders, including governments, and by investigating new models of public-private partnerships.
The Basel Institute on Governance has supported the B20 process for years, including this year’s B20 India as a Network and Knowledge Partner of the ESG Business Action Council.
Is Collective Action against corruption a competition risk for companies? - from Perspectives on Antitrust Compliance
This chapter (26) of Perspectives on Antitrust Compliance covers the scope and purpose of anti-corruption Collective Action and explains why Collective Action and peer collaboration are important in tackling corruption. It then gives practical advice on how to overcome concerns and avoid antitrust risks, including many examples from initiatives around the world.
Edited by Anne Riley, Andreas Stephan and Anny Tubbs, the book as a whole focuses on debates surrounding the function and design of antitrust compliance programmes. Its starting point is that increasingly, antitrust compliance is seen by companies not as a standalone topic, but as part of a suite of compliance efforts needed by companies to ensure that they comply with societal and shareholder expectations.
Working Paper 34: Local certification through Collective Action: an innovative approach to anti-corruption compliance and due diligence
How can local certification of small and mid-sized enterprises (SMEs) help to alleviate anti-corruption due diligence for SMEs as well as multinational corporations (MNC) seeking to work with them. This Working Paper by the Basel Institute’s Collective Action team attempts to answer that question based on discussions and analysis of current local certification initiatives in different countries and sectors.
Local certification in this context means the assessment of a company’s anti-corruption compliance standards according to a method devised through a Collective Action and developed within a domestic (local) market. The local component also involves verification (certification) by a reputable organisation based in the same country as the entity that is being certified.
The paper explores:
- Due diligence dilemmas faced by both SMEs and MNCs.
- How local certification can help SMEs develop and demonstrate robust anti-corruption compliance procedures.
- How a trusted certification programme can help alleviate due diligence on third parties by MNCs, using a risk-based approach.
- Wider benefits, including raising standards of compliance across the board.
- How a Collective Action approach boosts the potential of local certification to achieve these wins.
- Special considerations and six practical recommendations for practitioners seeking to raise levels of anti-corruption compliance through a local certification scheme.
About this Working Paper
This paper is part of the Basel Institute on Governance Working Paper Series, ISSN: 2624-9650.
The paper was funded by the KBA-NotaSys Integrity Fund of Koenig & Bauer Banknote Solutions. It is part of the Basel Institute’s local certification project, which aims to support innovative approaches to anti-corruption compliance and due diligence through Collective Action. .
The views and opinions expressed in this report are those of the authors and do not reflect the position of the KBA NotaSys Integrity Fund, Koenig & Bauer Banknote Solutions, any affiliates or any persons acting on their behalf.
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License (CC BY-NC-ND 4.0).
Citation: Hans, V., Wannenwetsch, S. and Aiolfi, G. (2020). Local certification through Collective Action: an innovative approach to anti-corruption compliance and due diligence. Working Paper 34, Basel Institute on Governance.
Anti-Corruption Compliance: A Guide for Small and Mid-Sized Organizations
Written by our Head of Compliance and Collective Action Gemma Aiolfi, this indispensable book offers step-by-step guidance to small and mid-sized companies and non-profit organizations in managing corruption risks in overseas markets. It covers how and why to build a culture of integrity, develop a risk-based anti-corruption compliance programme, and engage with other industry players in collective action against shared corruption challenges. The focus on culture, compliance and collective action helps resource-stretched companies to build a strong foundation for a healthy and flourishing organization, as well as contribute towards raising standards of integrity across their industry.
Key features include:
- Guidance for creating and contributing to collective action
- Quick definitions, tips and practical tools such as checklists
- A hands-on approach with an emphasis on culture and leadership
- Case studies and real-life examples of both corruption risks and the importance of a strong compliance culture
Anti-Corruption Compliance will be an invaluable resource for senior managers of small and mid-sized organizations in minimizing exposure to corruption risks in international markets. It will also prove useful to corporate lawyers and others involved with compliance functions in larger companies, as well as to academics and students of corporate law with an interest in anti-corruption and compliance.
ISBN: 978 1 78990 531 1
Here today and gone tomorrow? Integrity and anti-corruption in the private sector post covid-19
Governments are already contemplating life after lockdown and are keen to permit as many businesses as possible to resume operations, ramp up global trade once more, and to galvanise their economies as best they can - even as forecasts about global recession get bleaker by the day.
As economic activity resumes, what will be the effects of the pandemic on the health and well-being of corporate integrity standards and anti-corruption compliance? What support will companies need or want in the post-covid economic reality?
In this special analysis, Gemma Aiolfi offers her reflections on compliance in the post-covid world.
Mainstreaming Collective Action: Establishing a baseline
This paper sets out why and how Collective Action needs to become a global “norm” in the fight against corruption and an integral part of mainstream anti-corruption efforts. The idea is to ensure that Collective Action is considered in companies’ compliance programmes as a risk mitigation tool to analyse and address persistent problems of corruption. The pathway to achieving this is to embed Collective Action as recommendation in international, national and business-relevant standards.
The report:
- Describes anti-corruption Collective Action.
- Sets out what “mainstreaming” and “creating norms” mean in this context.
- Presents detailed analysis on the current state of endorsements of anti-corruption Collective Action by relevant bodies, including a selection of national anti-corruption strategies in various countries.
- Gives a brief description of the strategy to expand the take-up of Collective Action in such documents and standards.
Working Paper 32: Private-sector engagement in the fight against illegal wildlife trade
This working paper explores efforts by and with private-sector organisations to combat the multibillion-dollar illegal wildlife trade (IWT) and/or strengthen their resistance to IWT risks, with a focus on the East Africa – Southeast Asia trading chain.
Executive summary
There is widespread and growing awareness of the need for greater involvement of the private sector in efforts to prevent IWT. The transport and financial industries are the most clearly affected: the illegal products are usually trafficked via commercial land, sea and air transport services, and financial transactions take place via regulated financial services providers and the global banking system.
For their part, companies are starting to perceive of IWT not just as a conservation issue, and therefore confined to corporate social responsibility departments, but in terms of the risks this illegal trade presents to their business. These risks are tightly intertwined with other risks, particularly corruption and security.
Current multi-stakeholder initiatives aimed specifically at tackling industry-specific IWT risks show great promise to create a virtuous circle of engagement and action, but are still in their infant stages. Challenges include getting all relevant stakeholders around the table and building a strong business case for engagement that takes into account companies’ specific risks and needs. At the moment, key industry sectors remain unrepresented and will therefore act as a weak link that wildlife traffickers can exploit.
Companies’ levels of engagement in multi-stakeholder initiatives vary wildly and most are still unclear as to which departments and job functions are the most relevant in this sphere. Action is often ad-hoc and driven by individual “champions”, and funding is neither adequate nor sustainable.
Lastly, there is clearly difficulty in moving from commitment to action, in other words for companies to not only sign commitments on paper but operationalise them. Clearer monitoring and evaluation mechanisms would help to increase accountability in this regard.
A basic but major identified need is for more reliable, targeted and actionable information and intelligence on IWT, to enable companies to take informed internal measures, co-develop industry guidelines and effect real systems change. This can best be achieved through mechanisms that allow all stakeholders to pool information and resources in pursuit of their common goals.
These challenges echo some of the challenges addressed over the years by Collective Action initiatives focused on tackling shared corruption challenges.
This similarity, as well as the strong links between corruption and IWT, means that practitioners can benefit from lessons learned from anti-corruption Collective Action initiatives and do not need to reinvent the wheel.
About this Working Paper
This paper is part of the Basel Institute on Governance Working Paper Series, ISSN: 2624-9650.
Quick Guide 3: Integrity and anti-corruption compliance for SMEs
Gemma Aiolfi, Head of Compliance and Collective Action, explains that anti-corruption compliance doesn’t have to be complicated. Even small and mid-sized companies can easily build the basics of an effective anti-corruption compliance programme.
Find out five simple things a business leader can do to raise integrity in an organisation.
About this Quick Guide
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License. It is part of the Basel Institute on Governance Quick Guide series, ISSN 2673-5229.
Working Paper 25: High Level Reporting Mechanisms: A comparative analysis
This report discusses the different contexts and processes through which a High Level Reporting Mechanism (HLRM) has been designed and implemented in Colombia, Ukraine, Panama and Argentina, as well as initial interest in the HLRM model in Peru.
Its aim is to understand the specificities of each case and draw lessons applicable to future projects in other countries, whilst respecting the commitment to develop an HLRM that takes account of the specific country’s context.
About this Working Paper
This paper is part of the Basel Institute on Governance Working Paper Series, ISSN: 2624-9650.
Working Paper 23: New perspectives in e-government and the prevention of corruption
Does e-government have an impact in reducing corruption? Do e-government solutions sufficiently take private sector perspectives into account to maximise its potential for addressing corruption risks?
This paper addresses these and additional questions about the dynamic between governments and the private sector with respect to harnessing e-governance tools for corruption prevention. It is written primarily from a private sector perspective and for private sector actors who are interested in a more comprehensive understanding of the scope and examples of e-government solutions to improve their anti-corruption policies, but concludes with numerous recommendations for the private sector and governments alike.
About this Working Paper
This paper is part of the Basel Institute on Governance Working Paper Series, ISSN: 2624-9650.
The Basel Institute on Government was granted funding by GlaxoSmithKline (GSK). The work was undertaken between September 2016 and May 2017.
News and blog
Gemma Aiolfi: Tribute to Gretta Fenner at the 5th International Collective Action Conference
Gemma Aiolfi led the Basel Institute’s Compliance and Collective Action work for many years, working closely with our late Managing Director Gretta Fenner as well as our former President Mark Pieth to transform private-sector engagement in the fight against corruption. At the 5th International Collective Action Conference on 24 June 2024, Gemma spoke of Gretta’s passion and efforts over the years to promote and support Collective Action approaches and initiatives. Her speech, which you can watch here, preceded the prize-giving ceremony for the 2024 International Anti-Corruption Collective Action Awards, in which one of the Awards has been renamed in memory of Gretta. It is a pleasure and privilege for me to announce that the Outstanding Achievement Award is being renamed in honour and recognition of Gretta Fenner’s commitment to Collective Action, over all the years that she led the Institute. In fact, her approach to collaboration, bringing people together, breaking down silos and seeking practical solutions to difficult problems, really started when she first began her professional career at the OECD, when she convened multi-stakeholder meetings in the Asia-Pacific region in the aftermath of the 2004 tsunami. And so it’s fitting that the Basel Institute’s Private Sector team continues to work with the OECD to support and develop anti-corruption Collective Action in that region. As many of you may know, Collective Action was the initial inspiration for establishing the Basel Institute. Our founder, Professor Mark Pieth, was closely involved in the Wolfsberg Group and the World Economic Forum’s Partnering Against Corruption Initiative. He had an ambition to help the private sector to prevent corruption as a complementary approach to his work at the OECD to criminalise bribery through laws and regulations. In those days we called these multi-stakeholder efforts “industry standards”. So when Gretta first joined the institute, “Collective Action” as a term for anti-corruption initiatives wasn’t yet part of the terminology. But she embraced the concept because it resonated with her. And she supported the World Economic Forum and Wolfsberg Group initiatives as part of building up the Institute, in those early days. I think it’s fair to say that her belief in the power of collaboration between governments, companies and civil society really informed the way she believed the Institute itself should approach its work. Not only in the Private Sector team, but also in asset recovery, green corruption and the training methodologies as well. Gretta personified all the positive and good elements that we need and talk about in Collective Action: She had the rare gift of being a very good listener, courageous, innovative, diplomatic, mostly optimistic, and she was also a realist. So we had many discussions over the years about how to raise awareness about Collective Action, to mainstream it into a norm and to make it part of the toolkit to address corruption. She recognised that improving private-sector compliance programmes presented an opportunity to suggest Collective Action as a way to reduce corruption risks in challenging markets. She supported and advocated for its inclusion in the OECD Anti-Bribery Recommendation, as well as in other guidance and policy documents, such as in National Anti-Corruption Strategies. Whenever Gretta returned to the office from her international travels and meetings she was always excited to tell us about any glimmer of an opportunity to promote Collective Action in a particular location or with a potential partner. While Gretta emphasised that each sector has its own unique role and responsibility, she also knew that it’s only through joint efforts that we can create sustainable and impactful solutions to combat bribery. She saw the bigger picture, and knew how to bring it all together: Governments must establish robust legal frameworks and enforce anti-bribery laws; businesses should foster cultures of integrity and implement stringent compliance measures; and civil society can hold both public and private sectors accountable, as well as act as facilitators of Collective Action initiatives. For those of you who have attended our Collective Action conferences over the last 10 years, or participated in any of the other many meetings around the world, I’m sure you’ll recall Gretta’s grace, determination and great sense of humour. I do believe she would have been modestly delighted to know that the Award for Outstanding Achievement in Collective Action is now being given in her name. Thank you.
Evolutions in anti-corruption compliance: hope for the future
Gemma Aiolfi is an international expert in anti-corruption compliance and a driving force behind the development of private sector-led Collective Action. Gemma helped to establish the Basel Institute on Governance in 2003 alongside Professor Mark Pieth. She served as the organisation's Head of Compliance, Corporate Governance and Collective Action from July 2013 until October 2022, when she transitioned to the role of Senior Advisor. In this Q&A, she gives her personal perspective on the birth and evolution of anti-corruption compliance, plus the risks and challenges that compliance officers face today. Where and how did compliance arise? Anti-corruption compliance didn’t exist when I started my working life. Where compliance existed at all, it was mostly about regulatory health and safety standards. The concept of compliance related to economic crime began in the banking industry with the focus on profits from illicit drugs. My early career in banking in Basel in the mid-1980s coincided with the start of globalisation and the development of self-regulation via self-regulatory organisations to protect investors. Meanwhile, the Bank for International Settlements was focusing on market stability so contributed to the development of compliance from a supervisory angle. Internal banking compliance was based on the concept of “self-regulation within a regulated society”. In other words, those in the industry know best how to protect against risks and just need a stable framework to do so, based on some form of principles-based regulation. As industry deregulation and globalisation started to spread in the 1990s, a series of scandals cast doubt on whether self-regulation was enough. This ongoing cycle of scandals triggering more regulations on banks and policy debates on how to change regulatory approaches still continues today. How was compliance different to now? Very. For a start, regulatory compliance prevailed in many industries, including for the banking sector. When I joined UBS in 2005, anti-money laundering compliance was still absorbing the expansion into terrorist financing following 9/11 in 2001. Back in the early 2000s, banks only considered corruption risks related to the laundering of the proceeds through transactions or clients. The idea that bank employees themselves or intermediaries working for banks could be involved in corruption was barely considered. Even with that limited scope, compliance officers didn’t have an easy job. For instance, tensions arose when compliance officers started to challenge business decisions that could lead to reputational or legal risks due to the types of transactions or clients involved. If the bankers and their compliance colleagues were not aligned, who should have the final say? In 2010, the position of Global Head of Anti-Corruption was created in UBS. I was the lucky first holder of that position in the bank. This development coincided with an industry shift that included looking at employee-related risks involving corruption. An important trigger was the realisation that intermediaries – “finders” who brought in wealthy clients for a fee – could present a risk to banks. That’s banking – what about other industries? The notion of anti-corruption compliance within companies only started to pick up internationally after the OECD Anti-Bribery Convention came into force in 1999. The way that many countries implemented the Convention shifted the responsibility onto companies for how their staff and intermediaries behave in foreign markets where bribery involving public officials is a serious problem. For companies that have ridden this wave and now have mature and well-functioning compliance programmes, the benefits are clear. Not only are they much better able to adapt to evolving legal and reputational risks, but they can also defend themselves should a bribery issue arise. They are better placed to demonstrate to new generations of activist shareholders, customers and other stakeholders that they are not exacerbating bribery and kleptocracy in foreign markets. Those that continue to believe that they have everything under control without an anti-corruption compliance programme may find customer and investor pressure will cause them to rethink, even if the risk of prosecutions and fines seems remote. This “stick” would be a lot stronger if states were to enforce their foreign bribery laws more effectively. Even so, the growth of compliance beyond banking is still evolving today. Some companies and state-owned enterprises are still at a very low level of maturity. And corruption remains a serious problem. What principles have guided the Basel Institute’s work with the private sector? Pragmatism has been a driving force. If you want compliance programmes to be accepted and implemented, they need to work from a business perspective while still effectively addressing legal and reputational risks. We also focus on the culture within an organisation above all. Slapping more controls and checks on an organisation where the top management are indifferent to how business is won and employees are not encouraged to speak up about bribery won’t create an effective anti-corruption programme. Changing that culture to one of empowerment and “speaking up” is foundational for any anti-corruption compliance programme. It is sometimes also a huge challenge. Setting an example through actions is what brings the culture of an organisation to life. Leaders at the top, and throughout the organisation, need to give a strong, clear and constant message that bribery is not the way to do business even if it means missing out on some opportunities. Staff have to be provided with practical tools and management support when putting robust anti-corruption programmes into practice. And they should feel assured that if they do the right thing – refuse to pay a bribe to win a lucrative deal, for example – they will be praised and protected, not penalised. Last, individual compliance programmes help a company protect itself from risks, but alone they can’t change the environment in which they are working. That is why we have constantly promoted Collective Action between companies and other stakeholders as a practical and effective way to achieve systemic change in the fight against corruption in business. What developments in compliance are you seeing now? Compliance has never ceased to evolve and for many businesses it’s now recognised as the conduit to promote values and embed the right culture throughout an organisation. I am heartened by the inspiring compliance officers and company leaders we work with, both individually and through Collective Action initiatives. Over the last year, we have accompanied many such professionals as they expand values-based compliance into topics like human rights and environmental sustainability. They have broken silos and reached out to the civil society organisations that have traditionally dominated these areas. Some are working hard to raise standards of integrity across their industry, from metals technology to banking. And we have celebrated some real successes against deeply ingrained corruption challenges, like protecting seafarers from corruption in Nigerian ports. Another positive development in compliance is closer integration with other business functions, from HR to antitrust and export controls. In many companies, HR departments now actively screen people based on their values, not only at onboarding but also as a prerequisite for promotion. They include ethics, culture and other compliance topics in staff onboarding. This will gradually reinforce better organisational cultures over time – but only if the same approaches are also applied to those responsible for the oversight of compliance and the risk appetite of an organisation, including board members and CEOs. What challenges does compliance face? Despite greater integration, compliance still competes within an organisation for scarce resources. When times are tough, such as during the pandemic, managers might find it easy to cut compliance programmes. But the responsibilities and risks remain. Collective Action can help compliance officers do more with less, by co-developing guidance and sharing experiences with others. Business practices are changing fast and compliance needs to stay abreast. For companies with complex global supply chains, compliance and due diligence are expected to extend all the way to the end of those. And it’s not necessarily any easier for companies that are moving towards end-to-end control of supply chains. The rise in new technologies and social media runs both ways. On the one hand, they raise ethical questions and bring reputational risks that are mostly beyond a compliance officer’s control. On the other hand, new technologies offer opportunities to enhance compliance. These might be external, such as e-government to reduce discretion and improve transparency in processes like licence approvals and customs documentation. Or internal, such as streamlined workflows and safe reporting channels. Artificial intelligence for routine compliance checks could bring efficiency – though a compliance department without humans is not something I could envisage for the time being. Looking forward The evolution of anti-corruption compliance is a fascinating and transforming discipline. Courageous and forward-thinking individuals and organisations have driven step changes in how compliance interacts with business functions and its power to drive cultural and behavioural shifts. I am glad to see such individuals emerging among new generations and to see young entrepreneurs embedding compliance into their companies from day one. What will magnify their efforts is Collective Action in its many forms. If there is one thing I hope for, it is that Collective Action becomes embedded in companies’ compliance programmes and the anti-corruption strategies of national governments.
Is Collective Action against corruption a competition risk for companies?
Our joint chapter in a new book on Perspectives on Antitrust Compliance answers a common question that arises when compliance officers and company lawyers first hear about anti-corruption Collective Action: are there antitrust risks in engaging with other industry players through Collective Action? The short answer is no. The longer answer is, as we explain in the chapter, “quite the opposite”. Corruption distorts fair competition – through bribery, collusion, bid-rigging or other forms of manipulation and foul play. Companies with high ethical standards may struggle to compete in high-risk countries or sectors if others are willing and able to operate in the shadows. In contrast, anti-corruption Collective Action can help to level the playing field between competitors and increase standards of transparency and integrity across an industry or region. Neither a cartel nor a class action Our chapter first covers the scope and purpose of anti-corruption Collective Action. This is important because the term “Collective Action” itself may, ironically, trigger negative associations. One may think of class actions, collective bargaining, or collectivised and planned economies that stifle choice and competition. Rather, the “collective” aspect of Collective Action refers to the common challenge that brings participants together as a group, and the group’s shared approach to tackling it. For example, the Maritime Anti-Corruption Network MACN brings companies from the shipping sector together to address, among other things, the widespread problem of bribe solicitation in ports. This is a problem that negatively impacts all companies, but which none can solve alone. In these cases and many more, peer collaboration is important. This is because corruption is a complex global problem that needs diverse and innovative solutions. Collective Action offers a wider range of tools and approaches, including the ability to design new anti-corruption tools that take account of business realities and work in practice. Overcoming competition concerns Our chapter gives practical advice on how to overcome concerns and avoid antitrust risks, including many examples from initiatives around the world. A few simple steps could help companies to reap the benefits of engaging in anti-corruption Collective Action while avoiding risks. Examples include: Members of the Collective Action can be drawn from employees who are sensitive to the risks of antitrust and competition law concerns and who are also familiar with the corruption risks. Such persons could include senior compliance officers, the general counsel or similar officers. Have one independent external legal advisor who is not retained by an individual company attend the first meeting, to explain the antitrust golden rules. Following this, a suitably qualified and independent facilitator, such as an anti-corruption expert, should be able to address antitrust risks and manage meetings appropriately. Develop an antitrust policy that all member companies approve according to their internal procedures. This should include matters that cannot be addressed or discussed and what to do if a sensitive issue does arise inadvertently. The independent facilitator should draft and disseminate meeting agendas and reading material in advance,. As soon as possible, transparently publish the goals of the initiative, the rules and conditions for participating, and any public outputs on a website. Meeting minutes can be approved by external legal counsels and stored by companies and the facilitator, in case competition authorities request to see them. Internal documents useful for benchmarking – such as codes of conduct or standard operating procedures – should be shared confidentially with the facilitator, who can anonymise and sanitise them to inform group discussions. No sharing of sensitive internal information such as prices or fees or blacklisting of third-party intermediaries. Hold an early brainstorming session to discuss trust-building and related topics. Intrigued? See more details about the chapter and a link to the publisher’s website. For more information on this topic, or other questions on anti-corruption Collective Action and compliance, feel free to reach out to the Basel Institute’s Collective Action team through our new Helpdesk service. You’ll find more resources and publications on the B20 Collective Action Hub, a free online resource centre and database on anti-corruption Collective Action around the world. To see the power of Collective Action in practice, explore the activities and achievements of the Maritime Anti-Corruption Network. About Perspectives on Antitrust Compliance Edited by Anne Riley, Andreas Stephan and Anny Tubbs, the book focuses on debates surrounding the function and design of antitrust compliance programmes. Its starting point is that increasingly, antitrust compliance is seen by companies not as a standalone topic, but as part of a suite of compliance efforts needed by companies to ensure that they comply with societal and shareholder expectations. The book is available from Concurrences. For a 5 percent discount, use the code BASEL5 on checkout. The code is valid until 14 April 2022.
Four major developments in the fight against corruption through Collective Action
What are the four biggest developments in anti-corruption Collective Action in the last years? And what are some examples of these around the world? Gemma Aiolfi spoke on these topics to delegates at a Members Meeting of Etik ve İtibar Derneği TEİD – the Turkish Ethics and Reputation Society. TEİD is an inspiring cross-sectoral Collective Action initiative that has been working tirelessly since 2010 to promote business ethics in Turkey. Read her speech below or view it on here on YouTube. If you have any questions about Collective Action or want more details on any of these initiatives, please don’t hesitate to browse the B20 Collective Action Hub resource centre. You can get in touch with our team via our Helpdesk, a free advice service on anti-corruption Collective Action to promote fair business. Thank you for the invitation to speak at this important milestone event for the ethics and reputation society. May I congratulate you all on the commitment and engagement you all bring to addressing integrity and corruption related challenges. I’ve been asked to talk about examples of anti-corruption Collective Action initiatives from around the world. Before doing so I just wanted to mention four developments that are incentivising companies to engage in anti-corruption Collective Action. 1 Revised OECD Recommendation includes Collective Action for the first time The first is the revised OECD Recommendation published by the member countries of the Anti-Bribery Convention at the end of 2021. Among the new measures to reinforce efforts to prevent, detect and investigate foreign bribery, Collective Action is included for the first time. Member countries have to: “consider fostering, facilitating, engaging, or participating in anti-bribery collective action initiatives with private and public sector representatives, as well as civil society organisations, aiming to address foreign bribery and bribe solicitation.” This Recommendation will be part of the country monitoring process that the 44 member countries of the OECD Convention undergo on an ongoing basis. Quite simply, this means that governments will be asked to explain what they have done to foster, facilitate, engage or participate in Collective Action. So there is an international standard that is now encouraging the public and private sectors to get active and participate in Collective Action. 2 Collective Action becomes a key part of ESG and non-financial reporting Secondly, there is rapidly growing interest in corporate non-financial reporting, where companies explain how they address environmental, social and governance ESG issues. The largest organisation that publishes such information is the Global Reporting Initiative or GRI. GRI’s reporting standard on anti-corruption asks companies to describe whether they participate in Collective Action to combat corruption, including: the company’s strategy for its Collective Action activities; a list of the initiatives in which the organisation participates; a description of the main commitments of these initiatives. 3 Companies find synergies in human rights and anti-corruption Thirdly, there’s an increasing recognition in the convergences or overlaps between how companies are addressing human rights and corruption. These topics have much in common and are linked, but they also have important differences: Using Collective Action to share knowledge and experiences is a practical approach that some companies are already using given the new laws on human rights in order to keep up with these new developments. 4 Governments explore ways to engage with the private sector through Collective Action Fourthly, the Network of Corruption Prevention Authorities NCPA brings together government organisations from all over the world, many of which are responsible for drafting their national anti-corruption strategies. These strategies call on the private sector to prevent corruption. These authorities are now exchanging on their experiences and different ideas on how to engage with the private sector, including through Collective Action. Those are some of the developments in mainstreaming Collective Action. Let’s now take a look at some of the inspiring examples of Collective Action for companies. Collective Action in action – examples from around the world ------------------------------------------------------------ Measuring the effectiveness of anti-corruption compliance A question often asked by investors and boards is: How can you measure whether an anti-corruption compliance programme is really effective? This was a question posed by the one of the world’s largest investors – the Norwegian Sovereign Wealth fund manager – to a group of pharmaceutical companies. Together, they formed a Collective Action initiative to agree on key performance indicators to identify what an effective anti-bribery and corruption programme means in practice. The output was a set of indicators for companies to report on publicly. So far, two companies from the eight that participated in the Collective Action have published information about the quantitative and qualitative indicators of the effectiveness of their anti-corruption compliance programmes. This is probably the start of a discussion to identify more indicators of what is effective. This initiative is an example of how Collective Action can break new ground. It was the first to be inspired by an investor, and also to address a new area that is useful to companies. It may inspire other industry sectors to develop improvements to these basic indicators. Transforming beneficial ownership transparency in extractives industries The second example is the joint project of two major global Collective Action initiatives. Open Ownership and the Extractive Industries Transparency Initiative EITI are partnering to develop and deliver a new global programme called Opening Extractives. Opening Extractives aims to stimulate a real transformation in beneficial ownership transparency in the extractives industry. This will involve governments, companies and civil society publicly revealing the ultimate beneficial owners of their supply chain companies, and partners of the companies that engage in mineral and mining industries. This Collective Action could be a game changer in a sector that has long been associated with corruption risks, including kleptocracy and state capture. It's an exciting development because it brings together two well established collective action initiatives to tackle a really complex and political issue. We’ll have to see how it develops. Sharing compliance expertise between private firms and state-owned enterprises Compliance without Borders is a mentoring programme between state-owned enterprises and the private sector that was developed by the B20 and the OECD. It has been piloted in the last few months, and could be a great way for state-owned enterprises to benefit from experienced compliance officers in the private sector sharing their experience and expertise for free. At the same time, the private-sector compliance officers learn about the challenges of having to implement a compliance programme in a state-owned organisation. Developing industry-tailored anti-corruption guidance for high-risk industries The Natural Resource Governance Institute NRGI is a non-profit organisation that seeks to improve countries’ governance of their natural resources, with a focus on the oil and gas industry. Over a two-year period, the NRGI conducted a detailed desk review and analysis of corruption cases involving state-owned enterprises and their oil and gas corporate partners. They identified recurrent corruption issues and reviewed existing best practices in corruption prevention. Then they brought together, in a series of consultations, 15 of the largest oil companies plus state-owned enterprises and civil society stakeholders. The aim was to develop a new and tailored set of guidance that recommends measures that companies in the oil, gas and mining sectors should adopt to reduce corruption risks when partnering with state-owned enterprises. The Guidance also recommends measures SOEs can take to strengthen their anticorruption safeguards. The Collective Action entailed interviews with over 110 individuals and 50 companies from NGOs, companies, financial institutions, universities and a core group of 18 companies through closed-door workshops. The guidance breaks new ground for three reasons: It focuses on the business interactions between companies and state-owned enterprises – not on everything. For example, it does not cover gifts and entertainment because there’s already lots of guidance on that topic. It mixes basic and ambitious measures. Some can be implemented already, while others will take longer. It prioritises the public interest in the producing countries, rather than the company’s interest which is often the focus of compliance guidance. This means higher disclosure levels even if the entities are not legally obliged to do so, and stopping serious forms of corruption like kleptocracy where possible. This guidance could provide inspiration to other countries. There are SOEs everywhere in the world and many present similar risks to this industry sector. So the Collective Action methodology that the NRGI used could be applied in other sectors, other countries and to other corruption-related challenges.
OECD recommends anti-corruption Collective Action in its revised Anti-Bribery Recommendation
The Organisation for Economic Co-Operation and Development OECD has recommended the use of Collective Action to address corruption in its long-anticipated revised Recommendation of the Council for Further Combating Bribery of Foreign Public Officials in International Business Transactions "2021 Anti-Bribery Recommendation" . This is a positive step in efforts to bring together the public and private sectors, civil society and other stakeholders in the fight against bribery. It is the first time that Collective Action has been explicitly and formally recommended in a key international standard addressing bribery. The endorsement builds on increasing global attention to the need for Collective Action and multi-stakeholder collaboration to address complex challenges from corruption and climate change to human rights. Why is the endorsement significant? First, in holding governments accountable. The Anti-Bribery Recommendation is one of the legal instruments included in the rigorous peer review mechanism for parties to the OECD Anti-Bribery Convention have to undergo. Future monitoring reports will thus enable the private sector and civil society to identify what efforts countries are making to encourage Collective Action approaches to combat bribery. Second, for inspiration and guidance. Many non-member countries look to the OECD anti-bribery instruments for inspiration and best practices. Alerting these countries to Collective Action is likely to lead to more demand and support for these types of collaborative multi-stakeholder efforts to prevent and combat bribery. This includes more governments endorsing this concept in National Anti-Corruption Strategies, as countries such as the UK, Malawi and others have already done. Third, by advancing the OECD’s existing Collective Action support. The revision gives a formal boost to the OECD Secretariat’s long-standing engagement and support for Collective Action tools, such as the High Level Reporting Mechanism HLRM . Developed by the OECD together with the Basel Institute and Transparency International, the HLRM is a unique tool that targets corruption prevention in high-value public procurement processes. It can thus play a critical role in countries’ efforts to revitalise their economies during and in post-pandemic times. It can also help improve foreign investment and trust in government. Fourth, by helping to address risks faced by companies that operate internationally and are confronted by demands for bribes from foreign public officials. Collective Action offers a variety of innovative and tried-and-tested tools not only to help companies address their own risks, but also to encourage constructive engagement between the public and private sectors on bribery prevention. What does the revised Recommendation say about Collective Action? Adopted on 26 November 2021, the revised Recommendation aims to address challenges, good practices and cross-cutting issues that have emerged in the global anti-corruption landscape since 2009. It updates the 2009 revised Recommendation, which in turn updated the 1997 Revised Recommendation of the Council on Bribery in International Business Transactions. The revisions cover a wide range of topics, including Collective Action in three areas: Awareness-raising in the private sector for the purpose of preventing and detecting foreign bribery. The document states that, among other things, each member country should take concrete and meaningful steps to do this “…through collective action and partnerships between the private and public sector in awareness-raising activities." Addressing the demand side of bribery. Member countries should “consider fostering, facilitating, engaging, or participating in anti-bribery collective action initiatives with private and public sector representatives, as well as civil society organisations, aiming to address foreign bribery and bribe solicitation.” This opens up a wide range of possibilities for member countries to engage in and support Collective Action. For governments that are unsure of how to initiate engagement with the private sector, it provides a good starting point for the discussion. The document also recognises the crucial role that business organisations and professional associations can play in helping companies to implement measures to prevent and detect foreign bribery. It recommends that such organisations consider "promoting Collective Action" where appropriate, as part of wider efforts to provide advice on resisting extortion and solicitation. Learn more View and download the 2021 Anti-Bribery Recommendation The Basel Institute's Collective Action team provided input to the revision process of the 2021 Anti-Bribery Recommendation as part of the Public Consultation. Excerpts of our submission are included in Annex III of our 2020 paper on Mainstreaming Collective Action . Visit the B20 Collective Action Hub, a global resource centre on anti-corruption Collective Action developed by the Basel Institute on Governance
Gemma Aiolfi publishes new book on Anti-Corruption Compliance: A Guide for SMEs
Our Head of Compliance and Collective Action Gemma Aiolfi has turned her decades of experience in anti-corruption compliance and corporate governance into a practical guide for small and medium-sized enterprises SMEs . Published this July by Edward Elgar, the book offers step-by-step guidance to small and mid-sized companies and non-profit organizations in managing corruption risks in overseas markets. It covers how and why to build a culture of integrity, develop a risk-based anti-corruption compliance programme, and engage with other industry players in collective action against shared corruption challenges. The focus on culture, compliance and collective action helps resource-stretched companies to build a strong foundation for a healthy and flourishing organization, as well as contribute towards raising standards of integrity across their industry. Key features Guidance for creating and contributing to collective action Quick definitions, tips and practical tools such as checklists A hands-on approach with an emphasis on culture and leadership Case studies and real-life examples of both corruption risks and the importance of a strong compliance culture Anti-Corruption Compliance will be an invaluable resource for senior managers of small and mid-sized organizations in minimizing exposure to corruption risks in international markets. It will also prove useful to corporate lawyers and others involved with compliance functions in larger companies, as well as to academics and students of corporate law with an interest in anti-corruption and compliance. It is part of Edward Elgar's popular Elgar Compliance Guides series. Praise for Anti-Corruption Compliance: A Guide for Small and Mid-Sized Organizations Michael Silverman, Hughes Hubbard & Reed LLP and first World Bank Group Integrity Compliance Officer comments that: "This book should have a place in the libraries of SMEs and MNEs alike, and worn copies on the desks of compliance personnel and other senior company officers concerned with risk. Well-written and researched, the book should help enlighten and inform its primary audience of SMEs as well as others ranging from experienced compliance professionals at MNEs to regulators and academics. The case studies put real meat on the bones of sometimes obtuse or confusing anti-corruption laws and showcase possible compliance responses and good governance solutions to difficult real-life corruption risks." Philip M. Nichols of the University of Pennsylvania in the US calls the book "a must-read for people who are serious about understanding and complying with the myriad rules about corruption. The book is concise and direct, but comprehensive – it packs tremendous insight into a digestible format." Meanwhile, Nicola Bonucci of Paul Hastings LLP in Paris, France, states that "Aiolfi’s book addresses policy issues and presents practical solutions in a condensed and user-friendly manner. It is great reading for all practitioners, be they chief compliance officers, in house and external lawyers or CEOs. If you're not yet convinced by these testimonials, read it for yourself. For a limited time, you can get 35% off hardcover or paperback versions by purchasing Anti-Corruption Compliance on the Edward Elgar website. Just use the discount code AIOL35 when checking out.
Collective Action and competition risk assessment: contradictory or complementary?
I recently spoke about Collective Action as part of a virtual panel discussion along with Andrey Tsyganov, Deputy Minister of Russia's Federal Antimonopoly Service, on the topic of New Russian Antimonopoly Regulations. The webinar was organised by the Russian Business Ethics Network and The Wharton School of the University of Pennsylvania Zicklin Center for Business Ethics Research, and is available on YouTube here. Antitrust and Collective Action is a topic that generates heated debate, in part I believe because the Collective Action approach is not commonly understood in this context. So to contribute to this debate, here are the thoughts I expressed in the webinar: Shivers down the spine? At first sight, the term “Collective Action” is likely to send shivers down the spine of any competition authority. The notion of competitor companies coming together to discuss anything at all might appear highly risky. But rest assured that Collective Action does not refer to class actions, in which multiple plaintiffs get together to sue. Nor does it mean workers striking for better conditions or collectively bargaining with their employer. Collective Action is a method to tackle corruption that primarily involves the private sector getting together with civil society and/or government representatives. It draws on the idea that complex, multi-faceted problems, need multi-stakeholder solutions. International standards in anti-corruption laws and regulations acknowledge the need for multi-stakeholder approaches to address corruption. Many governments now include Collective Action in official guidance documents, in some cases as evidence of top-level commitment by a company to tackling corruption or part of a proper compliance management programme. For example, the UK’s guidance on the UK Bribery Act, and even the German Competition Authority in German cite examples of Collective Action as helpful methods to exchange on best practices and train supply chains on integrity issues. But that’s not the only reason Collective Action is becoming more and more common. It’s because companies, governments and civil society representatives increasingly see the value of working jointly to solve shared problems and mitigate risks. Collective Action against anti-competitive behaviour All of us are well aware of the economic and social consequences of corruption. Among other things, it stifles competition and is a form of anti-competitive behaviour. Antitrust and corruption are often closely linked – just think of bid rigging, collusion and price fixing in public procurement. Collective Action initiatives frequently take aim at this sort of anti-competitive behaviour. Examples include procurement focused Integrity Pacts such as the building of nursery school in Hungary or the construction of a hospital in Slovenia. So Collective Action can help address antitrust risks. But are there also antitrust risks in Collective Action? The short answer is no. Collective Action can involve competitors coming together to share best practices in compliance, particularly anti-corruption compliance and fair competition. This does not entail sharing information about prices nor the conditions for doing business. To ensure that antitrust or monopoly concerns are transparently addressed, it is advisable to convene Collective Action involving the private sector with neutral facilitators. The importance of a facilitator was a top finding in our recent working paper on success factors and strategies for Collective Action. This is one role that we at the Basel Institute on Governance play, as well as offering guidance and resources on anti-corruption Collective Action. We have facilitated such groups in a wide range of industry sectors, from finance to engineering and technology. Converging risk assessments – and how Collective Action can help What we’re seeing as a developing trend in companies is the convergence of risk assessments in for example anti-corruption, human rights and enterprise risk management more broadly. Risk assessments are the first step in developing a response to reduce risks. The recent development in Russia for companies to conduct competition risk assessments is therefore an interesting development. It provides an opportunity for companies to combine this obligation with a corruption risk assessment, because the topics are closely linked. In Russia, the anti-monopoly compliance measures are not compulsory, but for those companies that do implement a programme, they also need to: Conduct a competition risk assessment Demonstrate what measures are aimed at reducing the risks Conduct monitoring Carry out training Identify the compliance officer responsible These topics are closely aligned with elements addressing corruption risks in a compliance programme. So, it seems reasonable to combine this risk assessment with other risk assessments, including on corruption. This is not just true for Russia but more broadly. It also makes good business sense for companies, through a structured Collective Action initiative, to share experiences and know-how on this topic. Compliance officers can work together to identify best practices in conducting such an assessment and aligning the methodology with other risk assessments. Compliance with laws and regulations is not an antitrust risk in itself. And pooling understanding of how best to address legal and compliance requirements is all about ensuring a level playing field - when compliance officers are at the table. Collective Action tools against covid-19-related risks The pandemic has led to multiple changes in the way companies and governments operate. There are simplified procedures for procurement, horizontal cooperation between competitors and so on. I cover some of these in a previous blog on integrity and anti-corruption in the private sector post-covid-19. These changes to laws and procedures, whether temporary or mid-term solutions, could be safeguarded by deploying Collective Action tools. These could be Integrity Pacts that are monitored by civil society or High Level Reporting Mechanisms for procurement procedures. They could also be initiatives where companies come together and commit to transparency declarations that are monitored and/or on internet platforms. In short, Collective Action offers support to companies, regulators and citizens at this difficult time. It is complementary to other measures such as financial rescue packages. And a Collective Action initiative focused on benchmarking and sharing experiences about risk assessments would, in the current context, be an extremely interesting way for companies in many sectors to start collaborating constructively.
Why companies need resilience, and resilience needs compliance
New business and new markets present risks and opportunities. For a compliance officer, assessing and mitigating these together with business colleagues is no easy task. But a robust compliance programme and a clear, sustainable business strategy make it a lot easier. Risk and opportunity In the last few months, the business world has been turned upside down by the Covid-19 pandemic. We are reminded of the Chinese word for “crisis”, which is composed of the two characters for risk and opportunity. The ability to withstand this unprecedented crisis is something that many companies are continuing to grapple with months after the lockdowns first started. Everyone around the world has to manage the effects of the Covid-19 crisis on personal lives as well as economic livelihoods. Entire industries are rethinking their futures and what they can do better to ensure long-term sustainability. For some companies, the crisis has undoubtedly created opportunities and they will continue to prosper. For others, it will be the end of their existence. Once a crisis hits a company, its capacity to deal with it is a mark of its resilience. What is resilience? Resilience has many definitions. In this context, it means the organisation’s ability to bounce back from a major risk. This could be a natural disaster or misfortune such as a change in market conditions that knocks out a business plan, or a specific event like a cyber-attack. The pandemic encompasses many different risks and is a disaster and misfortune all at the same time. In the current economic climate, the concept of “resilience” has taken on a new significance. If resuming business and restoring reliability characterise resilience, then it will be support from the compliance function that will continue to provide guidance, stability and certainty in an uncertain future. That is why Chief Compliance Officers are increasingly expected to have an enterprise-wide focus, with compliance integrated into business operations. Embedding compliance into business operations To develop resilience, companies must invest in compliance by integrating risk assessments into processes and projects from the start. Only by fully understanding risks and addressing them can company management identify strengths and develop resilience. Making compliance considerations integral to those deliberations as work resumes will be a key element to ensure real resilience in business operations in future. As we contemplate the future of business, resilience will be at the forefront for many firms as they endeavour to ensure that lessons are learned to shorten the recovery process. This disaster is not a black swan. The next pandemic – or another major disrupter – will strike, so companies had better get prepared. An adapted version of this article appeared in German in the May edition of Recht relevant – für Compliance Officers, published by Schulthess.
How and why the UN should support anti-corruption Collective Action with the private sector – our UNGASS submission
One of our two submissions to the UN General Assembly Special Session against Corruption 2021 concerns private-sector engagement in the fight against corruption through anti-corruption Collective Action. Our recommendation UN Member States should put measures in place to promote the inclusion of anti-corruption Collective Action by the private sector as part of a risk-based approach to prevent corruption in line with Article 5, UN Convention against Corruption UNCAC . The reasons Well-implemented anti-corruption compliance programmes are increasingly acknowledged as essential for the private sector in order to address their corruption risks. Member States, international organisations, multilateral development banks, private sector stakeholders as well as the private sector itself, have all recognised this responsibility. See, for example, Article 12 of the UNCAC, which focuses on the private sector's role in combating corruption. Private-sector anti-corruption compliance programmes are often modelled on guidance issued by these various bodies, as well as other sources such as judicial rulings and non-conviction based resolutions issued by law enforcement authorities. Examples include the OECD Good Practice Guidance on Internal Controls, Ethics and Compliance, the US Sentencing Guidelines and the UK Ministry of Justice Guidance on the UK Bribery Act. Anti-corruption compliance programmes – no matter how well implemented – may have limited effects on corruption risks in certain markets and environments where corruption is systemic. In these markets, not only individual companies but entire sectors are challenged to conduct business with integrity. This results in the so-called prisoners’ dilemma. Anti-corruption Collective Action has the potential to transform this limitation. This is increasingly recognised by Member States in policy and law enforcement guidance, and standards set by a range of international initiatives. But much more needs to be done to galvanize the potential of Collective Action to make business integrity programmes more effective. Member States can incentivise the private sector to integrate Collective Action into their compliance programmes to address systemic corruption risks. This can be achieved through its inclusion in national and sectoral strategies, guidance and other relevant policy standard setting documents. More information View our contribution on the private sector to the Consultation Process in Preparation of the UN General Assembly Special Session against Corruption 2021. Find out more about Collective Action at the Basel Institute. Learn about anti-corruption Collective Action around the world on the B20 Collective Action Hub. Visit the official website of the UNGASS against Corruption 2021.
Here today and gone tomorrow? Integrity and anti-corruption in the private sector post covid-19
Governments are already contemplating life after lockdown and are keen to permit as many businesses as possible to resume operations, ramp up global trade once more, and to galvanise their economies as best they can - even as forecasts about global recession get bleaker by the day. As economic activity resumes, what will be the effects of the pandemic on the health and well-being of corporate integrity standards and anti-corruption compliance? What support will companies need or want in the post-covid economic reality? Does Horrid History Help? ------------------------- Looking forward makes it tempting for policy makers to look back to similar periods of economic misery such as the fallout following the Spanish Flu, the Great Depression, or the long shadow of the economic downturn after the financial crisis in 2008. Whatever these new or re-cycled economic recovery programmes entail, there are bound to be implications for anti-corruption compliance. Laws introducing new compliance standards followed the 2008 financial crisis, but the changes experienced by companies in the last 10 years or so that have influenced anti-corruption compliance are profound and exceed the scope of the policy making that has followed these historical examples. These changes were not only the result of new laws around the globe criminalising corporate bribery inspired by the OECD Bribery Convention and the ensuing explosion of interest in anti-corruption compliance. They were also more comprehensive and included: digital developments in all aspects of business conduct, such as interacting with customers, suppliers and other third parties; broader questions of the company’s role in society; corporate governance; behavioural science. These are just some of the transformations that have influenced anti-corruption compliance, ethics and the notion of acting with integrity over the last decade. Default positions ----------------- Some of these developments might be ditched, diluted or extended in the coming years, with implications for corporate standards on ethics and integrity. It’s not likely to be all bad news. It may be a rather mixed bag of opportunities and potential pitfalls and backtracking. Here are some thoughts on some possible scenarios from that mixed bag: The law will remain the law If it turns out that an organisation paid bribes, perpetrated fraud or tried to shore up its finances through improper practices allegedly as a result of the hardships caused by the pandemic, covid-19 will not provide a justification. Enforcement of laws addressing corruption and other forms of corporate crime will continue. Companies should not therefore neglect their anti-corruption implementation efforts. It might in fact be a time to consider more collaborative approaches like Collective Action – see below. Prosecution authorities might be keen to get back to work, but some governments may inflict financial cuts that could affect the capacity of law enforcement to pursue investigations. Government cuts to stymie effective enforcement or weak political will to support anti-corruption laws are nothing new, as OECD reviews on enforcement of anti-bribery laws indicate, but may be more evident in a post-covid world. Increased corporate pressure on home governments to support efforts to re-establish business in foreign markets could see backtracking by some governments when it comes to pursuing corporate corruption cases. Survivors due to sustainable principles Corporate leaders who are genuinely convinced that integrity in business is essential to success are well placed to weather the effects of the economic downturn and get ahead in the post-covid economic environment. This is because such companies are more likely to have a culture that welcomes employees “speaking up” and actively listens when they do. Being open to receiving new ideas and engaging with employees to find solutions and suggestions encourages innovation. In other words, companies that can adapt, are agile and are known to have ethical and sustainable approaches to business, including strong anti-corruption compliance principles, have a competitive advantage. They may even have undergone similar challenges in the past and learned from their experiences when developing enhancements to their ethics and compliance programme. Robust principles aren’t always enough to keep a company alive. Some industry sectors are more vulnerable than others, and companies with financial or other problems might also struggle however good their compliance programme is. Flexibility and continuity planning based on a robust business continuity plan that envisages a wide variety of serious risk scenarios may also give some companies the edge to bounce back more quickly than their competitors. From an anti-corruption perspective, companies that have well-designed and mature compliance programmes are potential mentors for their supply chains and business partners: they represent the good examples and offer inspiration to others. They can help others to meet the same high standards and create a level playing field by sharing and collaborating in Collective Action. More state-owned companies As governments promise ever larger sums of money and rescue packages to shore up their economies, there will be a surge in state support and bail-outs of some industries. This will lead to an increase in government influence in company ownership. The high levels of corruption risks in SOEs are well documented - see the OECD’s international standards here and here. Increased due diligence and a critical eye on governance will be crucial for any organisation entering into business with an SOE. This is essential in any case to properly identify and mitigate bribery risks, but especially important with new SOEs that emerge from the covid-19 crisis. Message to CEOs: don’t assume that an SOE that was previously privately held still has the same ethical standards in government hands – you may be in for a rude and costly awakening. SMEs will need support to attract investment and enter new markets There can be little doubt that many micro or small and medium-sized enterprises SMEs will not survive either the lockdown or the resulting economic meltdown. SMEs that do manage to stay in business may not have anti-corruption compliance at the top of their “to do” lists, but business survival mode should not be at the expense of good practices. In any case, smart SMEs can use their compliance and anti-corruption credentials to make themselves more attractive to investors, enter into business partnerships and develop their capacity to enter new markets. Schemes like the UK’s Business Integrity Initiative are designed to support SMEs do exactly that. Increased vertical integration The pandemic lockdowns soon revealed weaknesses in supply chains and reliance on a single source for essential components and products. Governments, citizens and some companies were taken aback by the deleterious knock-on effects of having outsourced production to suppliers that had to cease production due to the pandemic. This led to unethical behaviour in some cases – including accusations of “piracy” – and possibly involved bribery in others. Substantial increases in cargo costs as shipping options diminished have had severe consequences for many companies around the globe. Already before covid-19, large companies were increasingly aware of such dilemmas and choke points. So they may well now speed up decisions to own more - or all - of their supply chains to avoid such risks in future. For integrity and anti-corruption compliance this could have various implications: Current anti-corruption laws and compliance standards make companies responsible for third parties that offer, pay or promise improper advantages to government officials. Having a coherent and comprehensive anti-corruption compliance management system implemented throughout an integrated chain of companies would be a dream come true for a chief compliance officer. Alas, achieving a homogenous, fully implemented set of standards is likely to be as challenging as ever. Streamlining of ownership won’t remove all the factors that determine bribery risks - such as the diversity of the supply chain or its sub-sectors, different business models and the locations where business is conducted. The reputation risks in vertically integrated structures could be affected in both directions. On the one hand, the company will have more reputation to lose if a scandal breaks, and so might be more motivated to protect it with a decent compliance programme. On the other hand, the capacity to cover it up and manage the disassociation process may be greater in a complex structure. The immense economic power that these vertical structures are likely to wield could raise corruption risks. This could arise through the leverage that such conglomerates can exert when it comes to local prosperity and employment, enabling them to demand special conditions from local and national governments. These could relate to financial advantages such as tax privileges, or preferential terms for permits or licences that will induce the conglomerate to keep operating in certain cities or regions. Examples of such behaviours abound in countries where multinationals have already paved the way with such requests. To expect highly powerful conglomerates to act with impeccable ethical standards at all times and throughout their operations would be naïve. Good governance, robust anti-bribery laws and effectively implemented anti-corruption compliance standards are therefore essential to hold such organisations to account. Antitrust issues seem to have been less of a concern to competition authorities compared to horizontal risks - at least so far - but this may change if vertical integration becomes more common and hinders competition. Special treatment for strategic industries? Political considerations about what is a key or strategic industry post-covid-19 might change in response to lessons learned from weaknesses in public health systems, supply chains and procuring essential goods. Experience shows that strategic industries often enjoy a proximity to governments that can be unhealthy when it comes to transparency, bribery risks and competition. The use of lobbyists by strategic industries can also raise additional challenges. Due diligence, robust procedures and good advice on how to handle potential risks will be invaluable. A perfect storm is best weathered together ------------------------------------------ It almost goes without saying that increased vertical integration with an SOE at the top of the chain in a newly designated strategic sector would be the perfect anti-corruption compliance storm. It may or may not be a realistic scenario. But before compliance goes under and is drowned in such a tempest, there are opportunities for anti-corruption compliance in whatever the new economic reality turns out to be. One such opportunity is Collective Action. In an economic tight spot, the need for cost-effective solutions to compliance issues is more pressing than ever. Anti-corruption Collective Action not only between the private sector and governments, but also between private sector actors themselves, can offer opportunities to address issues of common interest in a cost-effective and pragmatic way. Obvious issues that are best tackled together could be identifying and eliminating new risks from new ways of working, or sharing ideas on the best training practices for a weakened supply chain. For examples and advice on this area, the Basel Institute hosts the B20 Collective Action Hub and offers free advice on anti-corruption Collective Action. After the storm --------------- The covid-19 pandemic has destroyed lives and livelihoods around the world, and will continue to do so in the future. Yet companies can also take the post-covid world as an opportunity not just to start operating at full power once more but to reconsider how they do business and how their anti-corruption and compliance programmes fit into this new world order. Establishing a strong, ethically based culture to develop business and enter new markets will be an investment worth making. The Basel Institute has worked with companies and other organisations of all sizes, sectors and from around the world for almost 20 years to help prevent or weather compliance and corruption crises. We know how hard it is for organisations to be under immense pressure, juggling multiple issues while working to stay in business and regain customers in the face of fierce competition. And we know that compliance officers are going to have a challenging time keeping their company’s integrity and anti-corruption compliance steady against the wind and waves of the post-covid world. Whatever the future holds – and we’re still being told that the only certainty is uncertainty – the need for good compliance officers with pragmatic and solid approaches will remain. Contact our Head of Compliance, Corporate Governance and Collective Action Gemma Aiolfi if you feel like you’re cast out at sea and would like some advice on compliance needs and opportunities in the post-covid world. Download a PDF of this article. Photo by Clément Falize.
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