The path to transparency
To mitigate financial and image risks associated to corruption, companies seek to consolidate a new-found awareness about the importance of dealing with the subject with transparency and specialized support.January-March | 2018
Facing a scenario of increasing surveillance on practices that represent corruption and at a time that multimillion leniency agreements make the newspapers’ headlines, there is increasing concern from companies with keeping the best practices and identifying frauds and failures in internal environments.
Companies constantly seek to adapt to regulations such as Law 12,846, of 2013, also known as the “Anti-corruption law”. “The negative effect for a company that goes through a situation involving corruption acts are enormous when it comes to image, remediation costs and steering away the focus from business. Companies are aware of this”, says José Paulo Rocha, Deloitte’s partner in the Financial Advisory area and leader of the Forensic Services practice in Brazil.
The impact can be easily noticed in widely disseminated local cases, but leniency agreements occur throughout the world nowadays. In October 2017, for example, the Swedish telecommunications company Telia Company agreed to pay for $965 million to the United States, Holland and Sweden authorities as a compensation for violations of a United States law againts corruption. Months before, in July, it was the turn of the North American oil company Halliburton, which has disbursed US$ 29.2 million as a penalty for paying bribes to authorities during its operations in Africa.
The increased interest in this type of specialized advisory service was revealed by Deloitte’s survey “Agenda 2018”, that addressed investment priorities for executives from organizations in Brazil for this year. For 33% of the companies surveyed, risk management and internal controls are among the five main priorities. Compliance management is also on the list for 26% of organizations.
The space for companies that fail to act with rigor in the compliance area is more restricted each day. One of the authors of the “Transparency in Corporate Reports” study, from the Brazilian section of Transparency International, Guilherme Donegá, believes that many organizations have already understood this concept. “Everything indicates that this is an inflection point, a change of culture. International experience, however, shows that, if the companies, governments and the society as a whole do not monitor this trend, there may be a reversion.”
The text, which was released at the beginning of this year, is the result of a wide collection of data among the one hundred largest companies and the ten largest banks in the country. The results show that, despite the advances, the average is still far from ideal. “Companies must ensure that the compliance role has independence and enough resources to make investigations and to act in a preventive manner, taking into account all the layers of the organizational structure”, recommends Donegá.
According to the Transparency’s report, institutional commitments and transparent public postures generates a virtuous circle. The document also states that transparent companies work hard on their practices, self-assess with more frequency and are subjected to external scrutiny, which stimulate improvements.
In this context, Deloitte’s “Forensic” teams act on two fronts: prevention and research. The focus is to mitigate or reduce the amount of problems that companies may have to face through rules, policies, training and reporting channels. “It creates a large set of elements that diminish the likelihood of such a problem occurring”, explains José Paulo Rocha, from Deloitte.
The updating work is also important. With drastic changes in the way and speed of disseminating information, different countries discuss and promote changes in legislation and there is a need to constantly reformulate the practices within the companies concerned.
Sometimes, companies already have these structures assembled, but they ask for help to get an update regarding the best practices of governance and compliance., José Paulo Rocha, Deloitte's partner in the Financial Advisory area and leader of the Forensic Services practice in Brazil.
When the preventive mechanisms fail or simply do not exist, enters the scene the second front of the Forensic work: investigation. From the identification of any irregularity, a survey is conducted to help the company making the decisions. “Experts analyze the situation to try and understand exactly what happened: the responsibilities, the people involved, the implications for the company, the corrective measures that need to be taken”, he explains. An important feature of this work is that it is up to the legal specialists to assess the final report and determine the actions to take. “We produce documents and information that can be used to determine if, in fact, there was some irregularity”, points out the leader of this practice at Deloitte.
The investigation are conducted through a varied set of tools. The team relies on traditional forms of investigation, such as face-to-face interviews, and even cutting-edge tools, such as evaluating information disclosed in social media and other electronic means of communication. “In general, these irregularities leave traces. In this way, we analyze payments, contracts with third parties, among other procedures”, says José Paulo. “People understand that these are important tools to protect their interests,” he adds.
The benefit of this type of work can go far beyond the company walls, as demonstrated by many cases handled by the American Justice. After the leniency agreements and the commitments to end irregularities, the country was mentioned worldwide as an example of cooperation in fighting corruption, therefore influencing the image of the United States abroad, which directly affects the business visibility in this market.
One more reason for Brazil to invest in these mechanisms, which will bring best practices for companies and positive publicity before the international business players.