Fighting global corruption by building sustainable corruption risk assessment process and developing a proactive risk management plan proportional to your organization’s risk exposure. Presented by Eric Pesik at Asia Risk Professionals Congress at the Carlton Hotel, in Singapore, March 2012

1. Fighting Global
Corruption
Presented by Eric Pesik
Asia Risk Professionals Congress
Carlton Hotel, Singapore, 2012

2. Fighting Global
Corruption
Fighting global corruption by
building sustainable corruption risk
assessment process and developing a
proactive risk management plan
proportional to your organization’s
risk exposure

3. Agenda:
1. New Anti-Corruption Laws
2. Risk Assessment Process
3. Risk Management Plan
4. Responsibility of Risk Officers

4. Agenda:
1. New Anti-Corruption Laws
2. Risk Assessment Process
3. Risk Management Plan
4. Responsibility of Risk Officers

5. Anti-Corruption Laws

6. US Foreign Corrupt
Practice Act (FCPA)

7. UK Bribery Act

8. China Anti-Bribery
Amendments

9. Commercial
Bribery

10. Bribery of
Government
Officials

11. Dodd-Frank
Whistleblower

12. Global Reach

13. Every
Country
Prohibits
Bribery

14. Agenda:
1. New Anti-Corruption Laws
2. Risk Assessment Process
3. Risk Management Plan
4. Responsibility of Risk Officers

15. FCPA Fines in Millions
Siemens (Germany) $800
KBR/Halliburton (USA) $579
BAE (UK) $400
Only US
Snamprogetti/ENI (Holland/Italy) $365 company
Technip (France) $338
JGC Corporation (Japan) $219
Daimler AG (Germany) $185
Jeffrey Tessler (UK) $149
Alcatel-Lucent (France) $137
Panalpina (Switzerland) $82

16. 58
Average age of persons
currently in US prisons
for FCPA convictions
Aaron G. Murphey, Foreign Corrupt Practices Act:
A Practical Resource for Managers and Executives, 2001 John Wiley & Sons, Inc.

17. Value of All Losses
(Occupational Frauds by Category)
Financial 68%
Statement Fraud
Asset 21%
Misappropriation
Corruption 11%
May exceed 100% because cases involve multiple categories.
Association of Certified Fraud Examiners, Report to the Nations 2010 Global Fraud Study

18. Frequency of All Losses
(Occupational Frauds by Category)
Financial 5%
Statement Fraud
Asset 86%
Misappropriation
Corruption 33%
May exceed 100% because cases involve multiple categories.
Association of Certified Fraud Examiners, Report to the Nations 2010 Global Fraud Study

19. Balancing
Proportionality

20. Risk by
Geography
Transparency International 2010 Corruption Perceptions Index

21. Risk by
Industry
Each industry is different

22. Risk by
Customers

23. Intermediaries
increase risk
Risk by
Intermediaries

24. Risk by
Company

25. Risk by
Constituents

26. Corruption Risk

28. Risk Inventory
Likelihood & Impact
Scale
Personal
Commitment
Form

29. Likelihood Rating Scale
Almost
Unlikely Likely
Certain
Not more More than
One every
Frequency: than every 3 once per
1-3 years
years year
Probability: 10% - 30% 30% - 60% > 60%

30. Impact/Severity Rating Scale
Minor Moderate Major
Financial
< $1 Million $1-5 Million > $5 Million
Impact:
Govt. / Official
Pub Awareness Pub Concern
Reputational Investigation
Impact: Regional State / National International
Internal Shareholders Public Markets
Little or no Business Unit Company
Impact or Function Operations
Asking for Doubting Canceling
Operational Reassurances Business Business
Impact: Individuals Individuals Criminal
Disciplined Terminated Sanctions
Employee Employee Loss of
Morale Turnover Mgrs/Execs

31. Risk Inventory
1. Political Contributions/Activities
2. Charitable and Industrial Contributions
3. Company Memberships
4. Expense Accounts
5. Consultants and Professional Service
Providers
6. Leadership
7. Company Culture
8. Accurate Books and Records
9. Expense Accounts
10.Acquisitions
11.Business Combinations
12.Third Party Representatives and Agents
13.Procurement
14.Gifts, Gratuities, and Entertainment
15.Export, Import, Customs

32. Cost-benefit analysis
Likelihood
& Cost of
Magnitude Avoidance

34. Low Likelihood High Likelihood
High Impact
High Impact High Impact
High Likelihood
Low Likelihood
Low Impact
Low Likelihood High Likelihood
Low Impact Low Impact

35. Low Likelihood High Likelihood
High Impact
High Impact High Impact
Add Cost to
Avoid or Mitigate
High Likelihood
Low Likelihood
Low Impact
Low Likelihood High Likelihood
Low Impact Low Impact

36. Agenda:
1. New Anti-Corruption Laws
2. Risk Assessment Process
3. Risk Management Plan
4. Responsibility of Risk Officers

37. Risk Inventory
Likelihood & Impact
Scale
Personal
Commitment
Form

38. Low Likelihood High Likelihood
High Impact
High Impact High Impact
High Likelihood
Low Likelihood
Low Impact
Low Likelihood High Likelihood
Low Impact Low Impact

39. Low Likelihood High Likelihood
High Impact
High Impact High Impact
High Likelihood
Low Likelihood
Low Impact
Low Likelihood High Likelihood
Low Impact Low Impact

40. Low Likelihood High Likelihood
High Impact
High Impact High Impact
High Likelihood
Low Likelihood
Low Impact
Low Likelihood High Likelihood
Low Impact Low Impact

41. Low Likelihood High Likelihood
High Impact
High Impact High Impact
High Likelihood
Low Likelihood
Low Impact
Low Likelihood High Likelihood
Low Impact Low Impact

42. Low Likelihood High Likelihood
High Impact
High Impact High Impact
High Likelihood
Low Likelihood
Low Impact
Low Likelihood High Likelihood
Low Impact Low Impact

43. Risk Inventory
Likelihood & Impact
Scale
Personal
Commitment
Form

44. Risk Inventory
Likelihood & Impact
Scale
Risk Management Plan
1.
2.
3. Personal
4. Commitment
5. Form
6.
7.
8.
9.
10.

45. Example:
Anonymous
Tip Line

46. Tip 40.2%
Management Review 15.4%
Internal Audit 13.9%
By Accident 8.3%
Account Reconciliation 6.1%
Document Examination 5.2%
External Audit 4.6%
Surveillance/Monitoring 2.6%
Notified by Police 1.8%
Confession
IT Controls
1.0%
0.8%
Fraud
Detection
Association of Certified Fraud Examiners, Report to the Nations 2010 Global Fraud Study

47. Tip With Hotline 47.1%
Tip 40.2%
Management Review 15.4%
Internal Audit 13.9%
By Accident 8.3%
Account Reconciliation 6.1%
Document Examination 5.2%
External Audit 4.6%
Surveillance/Monitoring 2.6%
Notified by Police 1.8%
Confession
IT Controls
1.0%
Fraud
Detection
0.8%
Association of Certified Fraud Examiners, Report to the Nations 2010 Global Fraud Study

48. Tip Without Hotline 33.8%
Tip 40.2%
Management Review 15.4%
Internal Audit 13.9%
By Accident 8.3%
Account Reconciliation 6.1%
Document Examination 5.2%
External Audit 4.6%
Surveillance/Monitoring 2.6%
Notified by Police 1.8%
Confession
IT Controls
1.0%
0.8%
Fraud
Detection
Association of Certified Fraud Examiners, Report to the Nations 2010 Global Fraud Study

49. 13.3%
Tip Without Hotline 33.8%
Tip 40.2%
Management Review 15.4%
Internal Audit 13.9%
By Accident 8.3%
Account Reconciliation 6.1%
Document Examination 5.2%
External Audit 4.6%
Surveillance/Monitoring 2.6%
Notified by Police 1.8%
Confession
IT Controls
1.0%
0.8%
Fraud
Detection
Association of Certified Fraud Examiners, Report to the Nations 2010 Global Fraud Study

50. Dodd-Frank
Whistleblower

51. Agenda:
1. New Anti-Corruption Laws
2. Risk Assessment Process
3. Risk Management Plan
4. Responsibility of Risk Officers

52. Risk Inventory
Likelihood & Impact
Scale
Risk Management Plan
1.
2.
3. Personal
4. Commitment
5. Form
6.
7.
8.
9.
10.

53. Constituency
Buy-in

54. Management
Buy-in

55. Risk Management Plan Low Like o
High Impliht od
ac
High Impact
1. High Likeliho
2. od
High Impact
3.
4.
5.
6.
7.
8.
9.
10.
Low Likelihoo
d High Likeliho
od
Low Impact
Low Likelih
Low Impactood
High Likeliho
od
Low Impact

56. Official
Tone From
the Top

58. don’t get trapped

59. Fighting Global
Corruption

60. Questions?

61. All images are from Microsoft Office Online, used with
permission from Microsoft, except for the following
images licensed under Flickr Creative Commons
Attribution License
Businessman behind web By internets_dairy Meeting nieuwe leden
flickr.com/photos/16339684@N00/2784622731/ flickr.com/photos/kripptic/1954828422/
Parlament by Convergència Democràtica de Catalunya Blue Telephone by By UggBoy/UggGirl
flickr.com/photos/convergenciademocratica/6197445493/ flickr.com/photos/uggboy/5345135964/
Signpost by Andrea_44
flickr.com/photos/8431398@N04/2680944871/
AdjustTie by Dplanet
flickr.com/photos/dplanet/94441582/
Businessman by Kripptic No Pictures by Dplanet
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