Finding the Balance Between Opportunity and Global Compliance

Conducting business in high-risk countries requires understanding and flexibility, two words not usually associated with compliance.

Posted by Dawn Lomer in Ethics & Compliance on October 27th, 2011

The demand for anti-corruption compliance is growing steadily. With every new enforcement action, companies are getting the message that this is no passing phase. The stakes are high and smart companies are paying close attention.

Even the banks are exerting pressure. On his Corruption, Crime & Compliance blog earlier this week, Attorney Michael Volkov wrote that “… anti-corruption compliance is being demanded by all the sources of capital and debt — financial institutions, private investors, bond holders and shareholders. Many clients now are required to demonstrate the existence of an effective compliance program before banks will lend them money.”

So anti-corruption compliance is no longer a nice-to-have. And it’s even more critical for companies that operate in high-risk areas of the world. Those with operations in the UK as well now have the UK Bribery Act to consider, along with their home country’s legislation, be it FCPA, CFPOA, or another.

Challenges of BRIC Countries

An obvious way to reduce risk would be to avoid operating in high-risk countries, and some companies probably do take this approach. The developing high-risk countries, known as the BRIC countries – Brazil, Russia, India and China – pose significant challenges, but many companies see these areas as key to their future.

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“These are all markets for us for growth,” says John Fons, Director of Global Compliance and Ethics at Modine Manufacturing, a world leader in thermal management products with operations all over the world. “We need to balance the growth potential against the risk of corruption.”


Balancing Flexibility and Risk

Fons, who chaired the American Bar Association’s sub committee on compliance training and communications and teaches business ethics at Marquette University, WI, has a great understanding of the issues faced by companies doing business overseas.

He provided some examples of the challenges his company faces in overseas markets.

“In India, there’s a certain holiday on which everybody exchanges gifts. It would be considered rude not to exchange gifts. So, as a consequence, when we were drafting our anti-corruption policy we had to take into account that we couldn’t say ‘no gifts’,” says Fons. “We had to put in it that you could give gifts only if they weren’t likely to be perceived as asking for some favor.” Modine faced the same issues in China, where gift giving is an important part of the culture. Being flexible without flouting the law means understanding the culture while balancing the risk.

“We also have operations in the UK and because of that we’re subject to the UK Bribery Act. We have to make sure that our policies and procedures are compliant with that law as it is being developed,” says Fons, noting that the terms of the relatively new Act’s enforcement are still developing.

“We have the great fortune of having a CEO who gets this,” says Fons. “He understands that doing business the right way is the only way to do it. And so the support, the proverbial tone at the top, is there.”


Dawn Lomer
Dawn Lomer

Managing Editor

Dawn Lomer is the managing editor at i-Sight Software and a Certified Fraud Examiner (CFE). She writes about topics related to workplace investigations, ethics and compliance, data security and e-discovery, and hosts i-Sight webinars.