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1606-1973762_Global Fraud Survey Chemical Results

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1606-1973762_Global Fraud Survey Chemical Results

  1. 1. With the global chemical industry expected to grow to over $5.5 trillion in revenue by the end of 2020 driven by expansion in international markets,1 managing fraud risk and compliance exposure is a critical business priority. Law enforcement agencies, including the United States Department of Justice (DOJ) and the United States Securities and Exchange Commission (SEC), are increasingly focused on individual misconduct and have heightened the pressure on companies to mitigate fraud, bribery and corruption. In this context, executives need to be confident that their businesses comply with rapidly changing laws and regulations wherever they operate. While many businesses have made progress in tackling these issues, there remains a persistent level of unethical conduct. EY’s Global Fraud Survey 2016 represents the views of nearly 3,000 decision makers in 62 countries and territories, and provides compelling insight into perceptions of fraud, bribery and corruption across the globe. The following summarizes the insights of the 363 survey respondents from the chemical industry. EY’s Global Fraud Survey 2016 Chemical industry results Download our Global Fraud Survey 2016 report: 13% indicated that they would be willing to provide personal gifts in order to win or retain business Key findings 23% indicated that they would be willing to provide entertainment to officials in order to win or retain business indicated that they do not include country-specific risks in due diligence procedures 33% 37% indicated that they believe bribery and corruption practices happen widely in the industry 18% indicated that they do not include identification of third parties such as vendors or distributors in due diligence procedures 27% indicated that they do not include an assessment of anti-corruption policies in due diligence procedures 31% indicated that they believe regulators appear willing to prosecute cases of bribery and corruption and seem effective in securing convictions Efforts to minimize the risk of corruption Compliance Execute a comprehensive compliance program that incorporates anti-bribery/ anti-corruption (ABAC) policies, travel and entertainment procedures and localized training Cybercrime Develop a cyber breach response plan that brings all parts of the business together in a centralized response structure Anti-corruption due diligence Undertake due diligence during M&A and of high-risk third parties such as distributors, sales agents, exclusive-use tollers, consultants and custom brokers Fraud risk assessments Per COSO’s 2016 Fraud Risk Management Guide, perform comprehensive fraud risk assessments to identify specific schemes, assess the likelihood and significance, evaluate fraud control activities and implement actions to mitigate fraud risks Whistleblowing Establish clear whistleblowing channels and policies (in local language) that not only raise awareness of reporting mechanisms, but encourage employees to report misconduct Finance Adequately resource compliance and investigations functions so that they can proactively engage before regulatory action 1. MarketLine, Industry Profile - Global Chemicals, June 2016.
  2. 2. EY | Assurance | Tax | Transactions | Advisory About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. © 2016 EYGM Limited. All Rights Reserved. EYG No. 03355-161Gbl ED none Contact information For further information, visit: or contact: Nelson Luis | Americas Chemical Industry Leader Fraud Investigation & Dispute Services T: +1 215 448 5056 E: Jill Birney | Chemical Industry SMR – Fraud/FCPA Fraud Investigation & Dispute Services T: +1 215 841 0643 E: How mature is your organization’s anti-corruption program? Limited and inconsistent compliance program Best-in-class compliance program High risk Metrics Limited Core Leading • “Paper Policy” • Code of Conduct • Ethics hotline • No fraud risk assessment • Lack of management sponsorship • Limited fraud risk assessment • Limited training • Consistent standards and policies • Reactive monitoring and reporting • Gift logs • Robust training framework • Feedback to critical ABAC functions • Specific monitoring controls and reporting for identified areas • ABAC language in all contracts • M&A FCPA due diligence • Third-party due diligence • Legal oversight of facilitating payments • Multi-disciplinary team responsible for ABAC program • Integrated code of conduct and anti-corruption policy • Enhanced, global risk-based approach • Onsite ABAC compliance assessments • Global standards and processes • Active monitoring and reporting (interviews, testing transaction) • In-person training at high-risk locations (in local language) • Forensic data analytics • Exercise audit rights (JVs, distributors, tollers) Individual accountability for corporate wrongdoing Board members and senior management should be aware that they and their employees are under increased personal scrutiny in matters in which, in the past, only the company might have been held accountable. The “Yates Memo,” a 2015 memorandum issued by the DOJ, detailed steps that prosecutors will take to strengthen their pursuit of individuals. By holding individuals accountable, prosecutors hope to deter future illegal activity and incentivize change in corporate behavior. Building on the requirements of the Yates Memo in April 2016, the DOJ announced the introduction of a pilot program which encourages companies to voluntarily self-disclose Foreign Corrupt Practices (FCPA) related issues. In exchange for disclosure, full cooperation with any government investigation, and the timely remediation of identified gaps in internal controls and compliance programs, companies may be eligible for up to a 50% reduction in fines, potentially avoid prosecution and/or be subject to a court-appointed monitor. How are companies funding its risk mitigation efforts? The survey findings demonstrate a continued prevalence of unethical behavior which places businesses at risk for illegal conduct. With the heightened level of regulation and businesses dealing with budget constraints in the chemical industry, investing your time and resources to manage risk is critical. Leading chemical companies are funding aspects of its legal, compliance and internal audit functions through cost saving and recovery mechanisms. Examples of the types of high-impact audits chemical companies are performing to monitor compliance and ensure maximum value is derived from its business partners include: Cost saving and recovery mechanisms • Forensic contractual compliance assessments (aka licensing and royalty audits) • Recovery of outstanding cash advances (ex-employees, non-active vendors) • Forensic data analytics (fictitious vendors, duplicate payments) High-impact audits • ABAC/FCPA compliance assessments • Code of Conduct/FCPA training in local markets • Third-party risk management (screening, background checks, exercising audit rights) • Trade control/OFAC • Cyber breach assessments • Chemical facility anti-terrorism standard assessments 82%of our chemical survey participants indicated that they believe prosecuting individual executives will help deter future fraud, bribery and corruption by executives Helps fund these audits