Manufacturing, Sectors - Written by on Monday, November 14, 2011 15:47 - 0 Comments

‘Anti Bribery & Corruption a priority’ The manufacturing sector talks the talk, but does it walk the walk? Find out.

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Pinsent Masons has launched its 2011 Manufacturing Report (Ed: this links to an MHT file so you might need to download a plug in) revealing the most pressing legal concerns for the industry.

When questioned on compliance, 75% of respondents stated that Bribery and Corruption was currently a priority representing the ongoing impact of the entry into force of the Bribery Act this year.

The recently published Transparency International Bribe Payers Index draws a distinction between light and heavy manufacturing when it comes bribery.  In summary, while light manufacturing is identified as one of the least corrupt industries (along with agriculture), heavy manufacturing does not fare so well – ranking 12th out of the 19th industries surveyed.  Manufacturers would do well to keep this in mind.

The Pinsent Masons report reveals that time has been spent reviewing bribery and corruption policies and training throughout organisations. U.S. companies have led the way.

This is unsurprising given the familiarity U.S companies have with the Foreign Corrupt Practices Act (FCPA).  However, given that U.S enforcement agencies frequently target non U.S companies and the Bribery Act is at least as, if not more, restrictive than the FCPA, there is no legal basis for non U.S companies spending less time on anti-bribery compliance than their U.S counterparts.

Pint glass half full

In addition to the 75% who said that Bribery Act compliance was a priority: nearly half of the respondents had either undertaken or were planning an anti-bribery audit; nearly half said that training had had active Board level involvement and nearly 30% said that training had been more widespread.

Pint glass half empty

The flip side is true.

For a quarter Bribery & Compliance was not a current area of focus.  Over half had neither undertaken an anti-bribery audit nor training at board level or beyond.   Indeed, nearly a third of those surveyed said they did not know if bribery audits had been undertaken, training given or a new policy implemented.

These are worrying statistics and do not sit well with the 75% who say that anti-bribery compliance is a priority.  In this there are parallels with the Ernst & Young fraud report earlier this year.

Risky business?

The Pinsent Masons survey confirmed that Joint ventures (which present their own risks in anti corruption compliance) remain the preferred method of new market entry with 36% of the vote, over acquisition of local operations with 22%.

Looking at the global marketplace, the 2011 report results still put China, India and Russia as the top three offshoring destinations for the next five years respectively but the balance between them has shifted slightly.  China and India have dipped slightly in percentage, with Russia gaining the fallout.

The report findings some of which are summarised above underscore the challenges facing the manufacturing sector as it offshores to jurisdictions traditionally considered to be high risk from a bribery perspective.

It’s a game of two halves

In summary, non U.S businesses should work to catch up with their U.S counterparts, fast.

The first half may be over but the second half has not yet begun.

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