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UN Global Compact 10th Principle Risk assessment and managing anti-corruption risks

Olajobi Makinwa UN Global Compact Office Cartagena, 17 November 2011

Risk identification  As defined by Investopedia: risk management is a two-step process - determining what risks exist in an investment and then handling those risks in a way best-suited to your investment objectives.  If a risk is notwell managed, the consequences can be severe for companies as well as individuals.

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Assessing the risk

Political Risk Social risk Industry risk Financial risk

In short, you need to identify the risk
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Corruption is wider than extortion and bribery

 Transparency International as ―the abuse of entrusted power  UNCAC does not define Corruption but gave instances ofacts of corruption that States at a minimum must outlaw-bribery of public officials; embezzlement, trading in influence, abuse of function, illicit enrichment by public officials, bribery, embezzlement in the private sector, money laundering, obstruction of justice 

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Corruption in the financial industry  Bribes and kickbacks: bank officials granting loans or letters of credit inreturn for kickbacks  Intermediaries: agents and brokers mis-selling because of commissions  Insider trading  Mortgage fraud  Money laundering

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Incentives  Where regulatory is uncertain  Frequent change of governments  Difficult environment to operating  Systemic Corruption  Multiple regulation/Taxation  Political pressure from government So, you need to identify and mitigate yourrisks
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Good practices Initiatives  IFC-led Equator Principles — a financial industry benchmark used by more than 60 financial institutions worldwide to determine, assess and manage social and environmental risk in project financing  Dow Jones and FTSE4Good Sustainability Indexes have made it increasingly apparent that socially responsible practices can improve access to financial markets andreduce capital costs.
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Examples  Financial Action Task Force – Money Laundering and Terrorists Financing Risk Assessment Strategies ( money laundering/counter-terrorist financing risk assessment to inform policy priorities and resource allocation)  EITI – publish what you pay

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Corruption risk assessment  Recent waves of ethics scandals- erosion of confidence and trust inbusiness among investors, customers, employees and the public  Several high-profile cases of bribery currently being investigated or prosecuted.  Companies are learning the hard way - they can be held responsible for not paying enough attention to the actions of their employees, business partners and agents.
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Criminalization of bribery  Growing number of countries have now criminalized briberywithin their domestic arenas  Various international organizations have developed instruments to fight corruption at the global level.  In the financial industry, the financial crisis erode confidence
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The pressure is mounting  The Group of 20 (G20) has recognized business as a stakeholder in anti-corruption efforts and considers its engagement essential  In most countries there arelocal organizations and pressure groups working to combat corruption

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One response - The UN Global Compact?
Launched on 26 July 2000 in New York with roughly 40 businesses ―A more sustainable and inclusive global economy.‖ Multi-stakeholder platform for collective action In 2011, over 6000 active business participants in 130+ countries Delisting 2,000 + participants 1500+ non-businessparticipants from civil society, labor, academia Equal representation in developed and developing world 49 percent small and medium-size enterprises (SMEs) 90+ active local networks around the world Rooted in universally accepted conventions including: UN Convention Against Corruption
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Fighting Corruption, a shared responsibility  “Businesses should work against corruption in all its forms,...