As the strengthening Australian dollar rises, so does the appeal for foreign direct investment in other countries. Couple this with the high commodity prices and many companies often overlook the task of researching an overseas environment in their lust to get material out of the ground.
But those operating across international boundaries – particularly in African and Asian countries where illicit payments are the cost of doing business – must look beyond the potential revenue to the ramifications of working in a corrupt country.
The shortage of quality staff and pressure on expatriate staff to get a project up and running within tight timeframes combine to make these offshore projects risky propositions from the outset.
Navigating different legal or regulatory environments, appreciating cultural and language differences, and dealing with local governments on issues such as exploration tenements and access to local infrastructure can often push the ethical envelope.
Difficulties often stem from organisations thinking it is acceptable to establish similar policies and operations to those in their home base, while not taking into account the different ways trade might be carried out in the host nation.
Governments around the world have attempted to curb corruption through legislative and regulatory reforms. In recent times, amendments have been made to a variety of laws such as the Commonwealth Criminal Code and the Income Tax Assessment Act.
More recently in Australia, the Government has introduced to Parliament the International Trade Integrity Bill 2007, which among other things will advance the laws restricting bribery of foreign officials.
In addition, overall community and stakeholder expectations demand companies develop and deliver effective cross-border ethical policies.
The most essential step is the education of employees. Often staff are sent overseas without sufficient training and a full appreciation of what to expect, which places them in uncomfortable situations.
A prospective company should incorporate measures to avoid risks into a code of conduct for employees and possibly look at developing a fraud and corruption control risk management program.
Once such a risk program has been completed, employees entering overseas jurisdictions should be provided with training and education about their new business environment.
If an incident of corruption does occur and is uncovered within a company, appropriately skilled resources must be available to investigate the matter.
Accurately and immediately identifying and scoping the initial steps to respond to an incident increases the chance that the investigation, which is often carried out in multiple jurisdictions, will result in a positive outcome.
As the rise in consolidation and cross border investment for energy and natural resources companies heightens, so too is the need for more sophisticated and effective ethical policies and programs. The price for turning a blind eye to foreign corrupt practices could be more than what was originally bargained for.
Red flags that indicate a need for closer cross-border scrutiny:
· Does the organisation operate in industries or countries with a reputation for corruption?
· Have offshore agents, consultants or other intermediaries been engaged to obtain regulatory approvals, permits or licences?
· Is the organisation discovering undocumented payments, mislabelled transactions or poorly substantiated disbursements of consulting fees?
· Are individuals discouraged from reporting concerns, or simply not informed about how they should go about doing so?
· Is policy on corruption regarded as sensitive information that is communicated only to a select group of high-level executives?
· Is the organisation making payments directly to foreign government officials? Are intermediaries being paid to facilitate the cooperation of officials?
