With this post, I would like to share my observations from the compliance meetup recently arranged by Ukrainian Network of Integrity and Compliance. I was honoured to be on the panel with the distinguished experts debating whether Ukrainian business is ready to embark on an independent verification of compliance and integrity level. The aim of the session was to help attendees achieve a deeper understanding of compliance certification and what benefits it could bring to the business.
Apart from strongly advising you to request the speakers’ presentations from UNIC Secretariat, I would like to share brief notes from my presentation “Committing to Certification: Challenges vs Opportunities”.
In my view, both the private and public sectors should apply NAME&PRAISE instead of NAME&SHAME approach. Basically, it means that instead of saying that business has done something wrong it is better to promote what business has done right. Displaying success stories should introduce positive bench-marking.
NAME&SHAME approach was rather effective and recognizable way to prevent corruption in Ukraine. For instance, for the several years, Transparency International Ukraine has produced information campaigns aimed at changing people’s attitude to corruption. The campaign called “Corruption must be spotted” was in my opinion remarkably successful as it appeals to “spot” corruption. In addition, it encouraged to destroy double standards: many people blame corrupt officials but are not opposed to living a luxurious life for money obtained through corruption.
In my view, such interpretation gives a message that the society must change the top down to the bottom-up approach. In an effort to address this, the world started to refocus from shame culture to fame culture in corruption prevention. UNIC keeps the pace with other similar initiatives (e.g., Clear Wave, Collective Action Coalition Against Corruption in Thailand, etc.) and tries to implement such approach in Ukraine through the introduction of compliance certification – a tool designed to distinguish compliance champions in Ukraine.
Without getting into specifics of the procedure, the certification should attest that the company has designed and implemented a risk-based policy and procedure to prevent corruption and other related risks with consideration of such factors industry, structure, business model, size, countries of operation, etc. Apparently, the certification should confirm that the UNIC Member has done all that can reasonably be expected to prevent bribery.
Having discussed this matter with several companies, I have identified a high-level vision of pros&cons any acknowledgment of compliance could bring. Well, one may say that the certification could appear to be ineffective… But I think that it is you, your company who should lead development of a sustainable market and be the agent of changes. For this, one should understand the role it could play in the practical application of incentives/sanctions in private/public sectors. In other words, Lead or Leave rule, strongly associated with McKinsey & Co, could allay the fears.
Rebutting the company’s claim “We don’t know where to start enhancing of compliance system”, I would refer to another McKinsey & Co rule - Grow or Go. For instance, UNIC presents itself as an educational platform providing its members with key tools required for improving compliance level and getting closer to certification by an independent expert. If the UNIC Member does not wish to constantly improve its compliance level, it should leave the network.
Of course, the cost for shaping the compliance system and the certification itself may deter companies from any compliance acknowledgment. In fact, the compliance is anything but cheaper than non-compliance. Remarkably, that on average, non-compliance cost is 2.65 times the cost of compliance. Further, just think about the cost for compliance while calculating the FCPA fines recently imposed by DoJ.
I also identify that companies might not gallop to get certification until benefits become obvious for them and society. In my view, for this the companies should go beyond the typical sanctions-only approach to incentive-oriented approach in motivating business partners to adhere to anti-corruption standards.
Being thoughtful of certified companies, the business should consider what peer-to-peer incentives they could offer. During the meetup, the following were voiced: less strict counterparty due diligence procedure, improved contractual terms (e.g., lower liability), favourable payment terms (e.g., faster payment of invoice), shortened timeframe between quotation and procurement, reduced procurement costs, etc. The companies also concurred that the public-to-private incentives could come into sight in the future as risk-based auditing by the state authorities was recently introduced by the Ukrainian government.
All that said - becoming certified is not a task to be taken lightly. Putting the compliance best practices and knowhow into practice and applying them in daily life is equally important (and of course necessary) for passing the compliance certification. What is your attitude to a compliance acknowledgment? Should it result in any favourable treatment? Is your company ready to stand for a certification of compliance level by an independent expert?
Tetiana is an investigator at the Business Ombudsman Council. Tetiana came to the team with 5 years of experience with international audit firm, where she was a senior associate and headed Corporate Compliance Practice.
In 2015, Tetiana was working at Munich office of international audit firm.
Tetiana graduated from law department of Kyiv National Economic University named after Vadym Hetman.