Business Insights: Bribery Act means challenging times for firms

The rise of emerging markets in recent years presents exciting opportunities for Yorkshire companies.

Doing business in these territories also presents new challenges that companies may not have encountered before. For example, local attitudes to mixing business and pleasure and local customs and practices, may not always be compatible with ethical standards required in the UK.

The recently introduced Bribery Act 2010 presents companies with some of the most serious risks but awareness of the risks presented by the new Act, particularly among smaller businesses operating overseas,

is nowhere near where it needs to be.

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Under the new rules, firms with UK operations will become criminally liable for corruption in their business, supply chain or sales channels anywhere worldwide, as will management who "consent or connive" with the offence. The legislation applies to small and medium companies, as well as to larger multinational companies.

For companies who conduct business in emerging markets, there will be increased compliance risk, yet in a recent survey conducted by the PwC Fraud Academy, half of the 40 non-executive directors and senior managers polled were unaware of any preparations that might have been made for the Bribery Act within their organisations.

Rapid growth into new international markets poses particular risks as there is often a lack of knowledge of doing business in those territories.

Understandably, local intermediaries, agents and distributors are often used to provide that knowledge. The activities of these associated parties can, however, cause UK companies to break the law. It's very important that adequate due diligence is undertaken to manage the risks.

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Emerging markets also tend to have numerous "touch points" with government officials at the local, state and federal level. Many more industries have elements of government control, for example, the energy and transport sectors. The Act introduces a new specific offence of "bribing a foreign public official". The definition of a public official includes legislative, administrative and judicial functions; and the offence is applicable to both individuals and corporate bodies.

Another major change under the Bribery Act is the new offence of "failing to prevent bribery". This means that companies unable to demonstrate that they have implemented "adequate procedures" to prevent corruption by their employees, or agents acting on their behalf, could face prosecution if bribes have been paid.

My advice is that companies, particularly those operating in riskier parts of the world, should review how they are doing business in those territories.

This means understanding their own risk profile, and performing an extensive review of their existing anti-bribery policies, procedures and controls.

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This isn't simply a legal issue. The real challenges are for management – implementing and maintaining the right processes, financial controls, governance and culture, and encouraging the right values and behaviours.

The opportunities of doing business in riskier parts of the world are often compelling and UK companies are rightly taking these opportunities.

The consequences of getting it wrong are, however, potentially severe, and include fines, seizure of revenues arising from bribes, and potential imprisonment.

The key is for companies to be aware of the requirements of the Bribery Act, and to make sure they identify and properly manage the less obvious risks associated with the obvious rewards.

Fran Marwood is director and leader of PricewaterhouseCoopers LLP's Investigations team in the North.