Panel 3: Ms. Rania MARDINI, American University of Beirut (AUB), "Building a sustainable public private dialogue to promote integrity"; Enhancing Integrity for Business Development in the Middle East and North Africa, Paris, 18 April 2016, session 3

1. R A N I A U W A Y D A H M A R D I N I , M B A , C P A , L C P A , C F E

2. UNDERSTANDING THE PRIVATE SECTOR
The corporation is “An ingenious device for obtaining individual profit
without individual responsibility”
- Ambrose Bierce; The Devil’s Dictionary
What drives the behavior of a business enterprise?
- Individuals - motivated by private interests
What drives the behavior of the individual?
- Desires more than punishment
THEREFORE:
To achieve true LT reform: incentives for business integrity – not only sanctions
MOST SIGNIFICANT INCENTIVE: OBVIOUSLY NOT SO OBVIOUS
To be protected from the mordant effects of corruption on the economy;
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3. UNDERSTANDING THE PRIVATE SECTOR
So, 1st recommendation : RAISE AWARENESS AS TO:
 the risks and costs of corruption,
 as compared to the benefits of business integrity - basically enhanced
 growth prospects & access to international markets.
 brand value, reputation, & firm value:
 recruitment and retention of principled employees
 profitability & sustainability
BUT: these are indirect, long-term benefits, AND
“In the long run we are all dead”, John Maynard Keynes
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4. UNDERSTANDING THE PRIVATE SECTOR
So, 2nd recommendation: CREATE DIRECT SHORT-TERM INCENTIVES:
 decreased cost of capital
 access to subsidies
 access to opportunities
 tax credits
 preferential conditions (reduced due diligence requirements, favorable
payment terms, etc…)
 Reputation: work on influencing the media agenda
A good strategy :
- 1st target the larger players in the market
- 2nd Mobilize them to drive change in smaller companies by:
 Serving as role models
 Providing ST incentives to the smaller co’s ex:
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5. UNDERSTANDING THE PRIVATE SECTOR
- INCENTIVES: a
- WHAT ABOUT CAPACITIES??
- PERCEIVED?
- ACTUAL?
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6. UNDERSTANDING THE PRIVATE SECTOR
PERCEIVED CAPACITY: People act on their perception of reality and not reality
itself.
Typically, the private sector sees itself as a victim, businesses do not
realize that:
 They actually have role in corruption,
 They might actually be fuelling the problem
 They expect change to start with the public sector.
So, 3rd recommendation: RAISE AWARENESS AS TO THE OPTIONS
AVAILABLE:
 Curb corruption
 Fuel it, or
 Take the sidelines
Along with the advantages and disadvantages of each.
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7. UNDERSTANDING THE PRIVATE SECTOR
ACTUAL CAPACITY imperative to implement reforms: far less than optimal particularly
for SMEs
- governance mechanisms
- ethics and organization culture that are once they are in place - is.
Some facts from PwC’s Global Economic Crime Survey 2016 - Middle East report:
• 17% of reported cases of economic crime were uncovered by accident, a rate much
higher than the global average (11%).
• Internal audit was able to identify more incidents in 2016 (10%) compared to 2014 (5%)
but still below the global average
• Internal Audit in the Middle East region is reactive and with limited resources
• Opportunity or ability to commit the crime – i.e. weak controls - is cited as the most
prevailing factor (63%)
• 1 in 4 respondents have never carried out a fraud risk assessment
• Economic crime reported through tip-off & whistleblowing decreased in 2016 compared
to 2014; this can be indicative of the culture and tone of ethics and compliance
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8. UNDERSTANDING THE PRIVATE SECTOR
• 79% of companies say they have a formal ethics and compliance
program but
 Only 60% support it with regular communications and training,
 More than 1 in 5 respondents are not aware of the existence of a such a
program &many are confused about its ownership - although it should be
everyone
 76% rely on Internal Audit to assess their program’s effectiveness.
So, 4th recommendation : PROVIDE THE ASSISTANCE AND TRAINING TO
BUILD THIS CAPACITY:
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9. UNDERSTANDING THE PRIVATE SECTOR
- INCENTIVES: a
- CAPACITIES a
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10. FURTHER RECOMMENDATIONS: PUBLIC-PRIVATE DIALOGUE
• Encourage conditions for dialogue: Initiating, promoting, supporting,
funding, and /or facilitating dialogue.
• Dialogue capacity building for business associations/chambers and
stakeholders
• Providing field support to projects in need of design/ re-engineering,
• independent evidence-based research
• Disseminating international best practice
• specialized training & technical assistance
• Providing expert policy advice
• Impacting the media agenda
THANK YOU
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