The view from across the pondProfessor David Lewis recently asserted that he would “welcome criminal charges against companies that victimised whistleblowers” and voiced his support for rewarding whistleblowers for exposing wrongdoing, stating that this could help dissipate the feelings of isolation and trepidation felt by those contemplating blowing the whistle. This would put the UK whistleblowing policy further in line with that of the US. The Dodd–Frank Wall Street Reform and Consumer Protection Act was passed into US law in 2010 and features an incentivised whistleblowing procedure. Following its inception, several high profile cases such as Sherry Hunt of Citibank caused a rush of blood to the head and scramble of keys to the vault for businesses keen to protect profits and reputation and a raft of critics too to the internet, and to congress. Whistleblowing in the US is increasingly viewed as an extension of the ambulance-chasing culture that had further tarnished the insurance industry and become part of a litigation-happy culture across the pond. Critics also fear that the SEC’s whistleblowing site that was launched in 2011 and provides a convenient mechanism with handy navigation for “submitting a tip” and “claiming an award”, further diminishes the altruistic possibilities of reporting genuine misconduct for the protection of others. Concerned parties worry the advent of such mechanisms will encourage whistleblowers to bypass internal reporting processes, as outlined in IMA Statement of Ethical Professional Practice. The SEC has, of course, conceded such a possibility and asserts that they will consider accepting a claim that has already been reported internally if the report is submitted within 120 days.
These observations are not meant to trivialise the process that such whistleblowers go through, and even a cursory glance into Ms. Hunt’s case shows that there were significant grounds for investigation, incrimination and compensation. In many cases whistleblowing requires a high degree of tenacity and stamina in what can be an enduring and challenging process. Under Dodd Frank the amount paid to the whistleblower is in direct correlation with the sanctions ultimately imposed by the Commissions (SEC and Commodities Futures Trading Commission), providing they exceed $1,000,000 (between 10 and 30%). Clearly this is not a route that any chancer with a petty grievance would go down for an extra buck. In addition, it should be noted that Dodd Frank affords the whistleblower considerably more protection than the SEC. They are protected from employer counteraction and are able to bypass the traditional administrative process with the Department of Labour and bring action directly with the Federal District Court.
The Serious Fraud Office (SFO) does not offer financial rewards to whistleblowers, although this is not to say the UK is fundamentally against incentivising reporting of wrongdoing; the Office of Fair Trading offers rewards of up to £100,000 for companies or individuals who report illegal activity that leads to prosecution or fines. An added bonus is the possibility of immunity from prosecution; something not offered by the SFO’s own whistleblowing procedure. The Ministry of Justice is in the process of developing deferred prosecution agreements which some commentators feel could see a rise in companies self-reporting to negotiate a more favourable settlement, and therefore an opportune time to review incentivised reporting. Aside from corporate misdemeanours there are a number of other situations where a more open, accepted and incentivised culture of whistleblowing would be helpful; consider issues of national security, benefit fraud (if memory serves there used to be a £50 prize for ‘beating a cheat’ back in the 90s…) and considering the recent healthcare scandals a reward process could certainly find a useful home at the NHS.
In a utopic ideal we would not only have a world devoid of incentivised whistleblowing but we would not have the crime that warrants hotlines in the first place. One of the most clear-cut ways of letting someone know that they are being rewarded, or have done the right thing, is to give them money. Assuming that a financial reward will colour the motivations of whistleblowers overseas, or perhaps in the future, on these shores, shows little understanding of the tribulations surrounding the process. The benefits from encouraging personal ethics in the workplace or society and considering rewarding those for taking a stand should be up for discussion. Consider the possible ramifications a whistleblower might be subjected to; loss of earnings, promotion delay, sanctions, harassment and other moral and material damage. Organisations that foster whistleblowing as an integral part of their corporate governance strategy help protect themselves against fraud, bribery, corruption, malpractice and much more. Not to mention the highly embarrassing and costly media and public exposure such disclosures can result in. And let’s not forget protecting those who have blown the whistle and put others security and wellbeing above their own; who have risked career, associations and safety.
Supposed financial motivations aside, what does motivate people to blow the whistle? Wanting to do the right thing, a desire to see accountability and justice, a sense of responsibility, protecting colleagues, protecting revenue of employer (and therefore one’s own job) are all valid, prevalent and positive reasons for whistleblowing. Some individuals may balk at disclosing wrongdoing in larger organisations as they perceive their ability to influence change as limited at best. But history has shown on plentiful occasions that these heroic people can become a David that beats Goliath, whilst the latter was too busy polishing his armour. Clearly bad pennies do turn up; those who are blinded by the possibilities of media attention or focussed solely on retaliation for, perhaps, dismissal or the perception of unfair treatment. But submitting to such scepticism is reductive and unhelpful to whistleblowing as a process and area of study.
The vast majority of us hope to live in a society of fairness and accountability, and ultimately perceive ourselves as moral agents promoting these values. This idea of the individual as the driving ethical force is referred to as ‘virtue ethics’. Academics such as Thomas Alured Faunce see virtue ethics as a more appropriate and progressive framework for whistleblowing; that disclosure is more a reflection of one’s own moral character and actions, rather than those of society at large or that we are just passive beings, blindly adhering to prescriptive rules. When it comes to negotiating ethical quandaries, looking to ourselves to honestly gauge how we would handle situations affords a more productive perspective than judging others on our assumptions of their motivations.
In 2010 The National Whistleblowers Centre (NWC) submitted a report to the SEC entitled “Impact of Qui Tam Laws on Internal Compliance.” The report was in response to concerns voiced by SEC commissioners and corporations regarding Dodd Frank’s potential impact on existing corporate compliance programs. The study analysed cases filed under the False Claims Act from January 1, 2007 to present and found that whistleblower rewards have “no impact whatsoever on the viability of internal corporate compliance programs or the willingness of employees to report suspected violations to their employers.” 87% of these filed cases initially reported their concerns internally, either to supervisors or compliance departments. Just 0.9% of employees who would eventually file a qui tam case worked in compliance and did not initially contact their supervision prior to contacting the government.
David Harris has been the Head of Business Conduct at BAE systems since 2009 and is a Chartered Member of the CIPD. Prior to BAE he worked at Lockheed Martin for 12 years in a variety of roles including, most recently, Director of Corporate Responsibility & Ethics, Ethics Officer and HR Operations Manager. David’s specialities include business ethics, ethics and business conduct, HR management, people management, coaching and mentoring and programme management.
How has the culture of ethical business changed in the last 25 years?
I’m not sure it’s been a culture change per say, more a need to clean up some ways of “accepted” business and make them “acceptable”. Stakeholder expectations have increased dramatically. The speed and detail that business-related information is now available would have been unthinkable a lot less than even 25 years ago. This increased information and knowledge has enabled us to challenge the way that people act and business is done. It’s no longer about what we do; it’s how we do it. Another change has been the clear demonstration of how irresponsible business can so negatively affect the lives of individuals, with no direct connection between the two.
What are the greatest challenges ethical businesses face?
For me it’s creating and sustaining the right culture and knowing that you have it. For all the effort and creativity we put into codes of conduct, policies, compliance training et al, everything hinges on our employees acting as we want and expect them to act, including how they deal with dilemmas. Another challenge is satisfying the need for and variance of relevant and engaging information that stakeholder groups seek. Providing the right types of evidence to support your statements and for that evidence to enable others to trust the same statements is wholly necessary, if a bit tricky!
If you could set one piece of global legislation to make businesses work more ethically what would it be?
I’m not sure that more legislation is what we need because we are talking about behaviours of people and organisations (collections of people). Legislation, like policies and processes, has its place, but what determines how a business works and how its people respond to situations is culture – ethical culture built in an ethical environment on ethical values and principles. Rather than more legislation, how about effective enforcement of that which we already have? Perhaps then we would see any gaps.
In terms of ethics, what are your greatest fears for the UK business community?
I’m not sure I have too many fears other than perhaps a creeping complacency from watching the financial and media sectors taking a beating. Complacency based on a [mistaken] belief that it “could never happen” to them. I think the UK Bribery Act forced the debate around, and understanding of business ethics and how it differs to compliance. In recent years I have seen a dramatic increase in the breadth of industry sectors and businesses I come into contact with at conferences and network-events, and the discussions are very different now. The openness amongst those working in this area is both refreshing and encouraging; it’s almost camaraderie and one I rarely felt outside of my own organisation when in HR or engineering. What also allays my fears is that, across the UK business community, this area of work is attracting very talented individuals with broad expertise, skills and knowledge, me not included of course! People who have the courage and conviction to drive the changes where they are needed in their organisations.
Geographically, what are the most predominant areas for risk at present? And what is the nature of those risks?
I don’t feel too qualified to comment in detail or to single out any region or country. But what I do think is that it doesn’t really matter where you are or intend going – robust and effective risk management through your planning as well as execution phases is critical. Having a long-range risk radar that prevents you making assumptions against limited pieces of information or intelligence is a great help. Being able to collate often disparate pieces of data to build a picture that then informs and promotes the discussions amongst and challenges from senior leaders. If you can do this then it doesn’t matter if it’s a new joint venture in the EU or a new plant in Asia, the risks will be identified, qualified, quantified and managed.
The response to the Bribery Act from the business world has been well documented; but from your own point of view, what have been the most significant contentions and concerns with adhering to the legislation?
We welcomed the Act all along because we saw the need for something that helped create a level playing field for certain business activities and transactions around the world. I think what gave most people concern was the idea of needing “adequate procedures” without being told what they should look like. For us we continue to devise better ways of measuring and monitoring various processes and procedures to increase our confidence of “adequacy”. I’m not a lawyer, but personally I get a sense that the idea of self-disclosure is something that many are at best unsure of, at worst completely distrusting.
What are the aspects you most enjoy/like about working in business ethics?
I absolutely love the fact that everything we do has to be the result of data and information gathering; some process of analysis and synthesis to understand what is actually going on; the design, development and deployment of improvement interventions and then monitoring those to see if they had the impact you set out for. Through networking and benchmarking I see lots of companies and talented individuals doing great things and many new ideas emerging all of the time. But no-one can tell us what we need to do for BAE Systems, or how to do it – though some do try! It’s for us to decide and explain and although we find ways to test things out there is little if any room for failure.
And least enjoy?
Ironic – but not having a book that now again I could turn to that says “here’s the solution to your problem”! Not that I would want this often, but I do get a bit put off by the amount of academic research, opinion and direction out there that is almost impossible to translate into the workplace.
What has been the toughest challenge of your career? Moving from a career in engineering into HR management was a massive eye-opener for me. Until then I thought I knew people as well as a bit about the business. I wasn’t even close! So much change for me personally, at a time that the company I worked for was changing significantly too, meant that the first year remains the most sustained period of intense pressure I have faced. Having said that it is probably the most enjoyable because I learnt so much about myself, and it wasn’t all good either!
What do you consider to be your greatest achievement?
I don’t do questions like this very well as there is very little I have achieved without the help and support of others. From the workplace the thing I am most proud of is helping some of those I have been lucky to manage realise their own potential. To see people grow in capability and confidence to move on to and be successful in roles way beyond their early ambition gives me real satisfaction. Maybe one or two of my early managers feel that about me? Or maybe not!
As Europe and the world becomes more integrated, working practices change fast and often affect more than one country at a time how to you keep abreast of what affects you and your company?
Sometimes the amount of information and the volume of opinion can be overwhelming to the point where it would be easy to switch it all off. But it is essential to keep abreast and so I rely on one or two good sources of “summarised” reporting (I can go to the detail if I wish) and networking. I find that regular contact with well-chosen groups and trusted, like-minded individuals help in sharing ideas and practice and keeping me sane (being in an ethics role can become lonely!). We may be dealing with things differently, but most of us are struggling with exactly the same source-problems and I find that sense check really valuable. One of the things I would recommend anyone does is develop some effective filters for things you pick up. If it sounds like waffle or narrow opinion, drop it and leave it dropped. If it sounds like a real nugget you may want to refer back to, put it somewhere you will easily find it. But don’t become a squirrel, like cupboards even IT systems have their capacity limits!
How do you encourage best ethical business practice internationally?
The “must do” and “must not do” items of policy are simple, but they cover just a small percentage of what our employees are likely to face. One of my favourite quotes is “If it looks like a duck, swims like a duck, and quacks like a duck, then it probably is a duck”. Almost everyone has intuition for when something isn’t right – that is the time to seek advice. If it does not fit with our values and expectations then it isn’t right, for us at least. And of course, having access to a confidential helpline that they can trust will encourage them to seek advice in difficult circumstances.
See David’s LinkedIn profile.
View BAE’s Corporate Social Responsibility Pages.
Read our interview with Philippa Foster Back Back, Director of the Institute of Business Ethics.
David Lewis is Professor of Employment Law at Middlesex University and convenor of the International Whistleblowing Research Network. He has published articles on whistleblowing in both law and management journals in several countries and has contributed to and edited three books on this subject.
In this fascinating Q and A he discusses whistleblowing policy, the future of whistleblowing, domestic and international legislation and more.
What’s your opinion of the state of play of whistleblowing in the UK?
Whistleblowing procedures are now very common in the public sector but less so in the private sector. However, this may change rapidly as a result of the Bribery Act 2010 which provides a complete defence to the charge of failing to prevent bribery if an organisation can prove that it had “adequate procedures”.
Research conducted by Public Concern at Work shows that many people are unaware that there is some employment protection for whistleblowers so greater efforts are needed to publicise and explain the legislation. Despite the fact that the relevant statute has been in force since 1999, I suspect that many potential whistleblowers are still choosing to remain silent about serious wrongdoing. This cannot be in the public interest.
And overseas?
Other countries are increasingly introducing legislation. Some of this is modelled on the UK but quite a few statutes are more sophisticated. For example, the UK only aims to protect whistleblowers whereas elsewhere there are attempts to encourage disclosures and to ensure that concerns are properly investigated. A statutory obligation on employers to maintain whistleblowing procedures is becoming more common. Research in the US demonstrates that in practice rewards promote whistleblowing so some Governments have started to make provision for them.
Do you think whistleblowing works?
Although the process of whistleblowing is often seen as problematic, we should bear in mind that there is evidence from a large scale research project in Australia that whistleblowing can be successful. The main reasons people give for being unwilling to report wrongdoing are fear of retaliation and a belief that raising a concern will make no difference. If employers can create a positive culture by committing to a confidential reporting procedure which complies with good practice and can demonstrate that they value disclosures and will protect disclosers, there is no reason why internal whistleblowing should not work. Inevitably, things will go wrong occasionally so employers need to contemplate external disclosures. Again, if this is managed properly, for example by suggesting appropriate recipients of information, it should be possible to avoid destructive media or internet disclosures.
Do you think the legislation in place (Public Interest Disclosure Act) is robust enough to encourage and protect whistleblowers?
As previously mentioned, the legislation in this country only seeks to protect workers who choose to blow the whistle. It does not require employers to have a whistleblowing procedure and does not normally oblige workers to raise concerns. If we want to encourage disclosures about wrongdoing there needs to be more emphasis on the message rather than the messenger. At present the “good faith” requirement may deter some important disclosures because potential whistleblowers may be uncertain about whether or not they will be protected. The legislation also contains other expressions that are undefined and problematic, for example, “substantial truth” and “exceptionally serious failures”.
What advice do you have for organisations that have adopted a whistleblowing policy?
In my opinion top management needs to demonstrate a commitment to a culture of openness and should ensure that their organisation has a procedure that complies with good practice as set out in the 2008 BSI Code. For example, it should indicate what concerns should be raised, how and with whom; it should guarantee confidentiality as far as possible and give undertakings about retaliation; it should provide for investigations where appropriate and for a discloser to receive feedback about the outcome. Procedures should be introduced after consultation with union or other worker representatives, be well publicised and regularly reviewed.
What problems are caused by the portrayal of whistleblowers in the media?
We need to bear in mind that successful whistleblowing is rarely newsworthy, except perhaps when an individual receives a large reward. A particular problem so far as I am concerned is that the media have failed to convey the fact that some external whistleblowing is protected by UK legislation whereas it is highly unlikely that internet disclosures will be covered.
What changes do you see happening in the next 12-18 months?
As a result of the changes in the unfair dismissal provisions, many commentators are expecting that more whistleblowing claims will be brought. Apart from discrimination complaints, workers who lack two years’ service will have no other mechanism of having their dismissal case heard. Because it is an issue of enlightened self interest, I anticipate that more employers will introduce whistleblowing procedures and ‘hotlines’ and will publicise their arrangements on websites.
If you would like to find out more about how confidential whistleblowing hotlines can help your business please contact scott.bridgen@expolink.co.uk
As part of our commitment to promoting good corporate governance and ethics across the global business world, we are delighted to be sponsoring the Institute of Business Ethics Masterclass on Building a Speak up Culture, facilitated by Lori Tansey-Martens of the International Business Ethics Institute, Washington DC. Our Hotline Manager, Scott Bridgen, will be attending to contribute to the discussion on how whistleblowing hotlines can play a vital role in every business’s corporate governance strategy.
The course takes place on Friday 18th May 2012 in London. For more information on the IBE website click here or contact either events@ibe.org.uk or scott.bridgen@expolink.co.uk.
How has the culture of ethical business changed in the last 25 years?
I am not sure it has actually changed. Companies have simply recognised the need to be more explicit about doing business ethically.
Major developments have been that companies now, in the main, provide guidance to staff about expected behaviours, ways of handling certain situations and so forth, usually in the form of a code of ethics/business practice. This has happened because the ‘job for life’ syndrome where one would learn alongside another employee about how the company worked no longer is the case. People switch careers or companies more frequently and have more diverse backgrounds than 25 years ago, so they need to understand more quickly how the company operates.
What has been the toughest challenge of your career?
The toughest challenge has been to do the right thing even if it meant I went out on a limb! It is rewarding though when doing so is recognised subsequently as having been the right thing to do.
What do you consider your career high points and/or your greatest achievements?
Finding myself at the Institute of Business Ethics which combines my interest in business, seeing it run successfully with education and encouraging people to share best practice – all within a charitable not-for-profit organisation.
If you could set one piece of global legislation to make businesses work more ethically what would it be?
I think if companies had to state in their memorandum and articles of association when they set themselves up how they are going to conduct their business (not just what the company is going to do), a benchmark would be set to measure that company’s performance.
What are the main factors that attract people to working with the IBE?
We are a small, friendly team who work closely with our subscriber base and others who share an interest and passion for the subject. Every day is different so there is no time to get stale!
In terms of ethics, what are your greatest fears for the UK business community?
I fear that cynics will never acknowledge the good that business does and the way, in the majority of cases, that businesses behave. Businesses and companies are human societies in themselves, with well and poorer behaved individuals making up the whole. Sadly, there are some rotten apples but to judge all by the few is unfair.
And your greatest hopes?
My hope is to prove the cynics wrong through businesses providing goods and services and conducting themselves in an open and fair manner that earns the respect and trust of the wider community.
How has the IBE utilised new technologies to progress its work and message?
We have Twitter and Facebook pages and regularly update and review our website; always looking for new ways to improve communication with our subscribers and others interested in the subject. During 2012 we will be introducing webinar events to reach out to those unable to attend our events in person.
The response to the Bribery Act from the business world has been well documented; but from your own point of view, what have been the most significant contentions and concerns with adhering to the legislation?
The legislation, for the most part, is common sense if you wish to stamp out bribery and corruption, which the business world needs to do as it is so corrosive. The most difficult element is how to say ‘no’ to a facilitation payment when you are at the front line and a lot hinges on whether you pay or not. This can be made worse if the payment made actually equates to the official’s salary as the local government knows they can get away with such practice.
Do you think the communications regarding the Bribery Act from the MoJ et al have been adequate?
In general, yes, though clearer practical guidance regarding facilitation payments would have been helpful. The SFO has now issued further guidance on this.
What do you see as the IBE’s main responsibilities when it comes to the Bribery Act?
Ensuring that experiences and practical solutions that companies have, relating to the Act, are shared for the benefit of all.
IBE has always fostered strong academic partnerships – how do you hope this will evolve in the future?
We will continue our annual student essay award, which for the last three years has had an Olympics theme of Ethics, Business and Sport, co-sponsored by the Pierre de Coubertin Committee.
We are also doing research into the Teaching of Business Ethics, an initiative co-led with the Institute of Global Ethics, to encourage the standard setters to include a larger element of teaching business ethics in their criteria for evaluation.
Thirdly, we are encouraging higher education institutions to establish codes of ethics, following up from a publication we did with the Council for Industry and Higher Education a while back. This was picked up on again by Lord Woolf in his recent report on the LSE where he concluded that such institutions should have a code of ethics.
For further info about the IBE visit www.ibe.org.uk
View our interview with David Harris, Head of Business Conduct at BAE Systems.
In the next in our Q&A series we get the benefit of Fraser McLaren’s considerable expertise on risk management in the global market place, compliance, the ubiquitous Bribery Act and more. Fraser McLaren is Head of Business Risk at Centrica.
Tell us more about the challenges a global organisation with suppliers all over the world face in terms of risk management.
Centrica has an increasing portfolio of supply and service arrangements in offshore country locations such as India, South Africa, Poland and Portugal. Offshoring carries a number of risks including exposure to political risk, natural disasters or breakdown of critical infrastructure. The impacts of these risks can be varied, but could include supply shortages, price increases or damage to the company’s brand and reputation. We manage risk at all stages of the supply chain from checking whether potential suppliers meet our corporate responsibility criteria, ensuring adequate contingency arrangements are in place during the contractual phase and monitoring them through news feeds, country alerts and other third-party and supplier intelligence.
We regularly review country risk and have contingency plans in place to ensure that, at a potential time of chaos, we’re able to protect people and, financial and physical assets in the supply chain. We also take a very proactive approach to supplier risk, particularly in light of global economic conditions, including regular financial health-checks of our key outsourcing partners. We’re also recognised as thought leaders in the development of outsourcing/offshoring best practice by the National Outsourcing Association and have picked up three awards in the last three years. The latest award came at the European Outsourcing Summit, where we were presented with the ‘BPO Contract of the Year Award’ for our partnership with our outsourcing partners EXL.
What compelled you to employ a confidential, independent Whistleblowing Hotline, and in particular, Expolink’s?
Centrica is committed to operating professionally, fairly and with integrity wherever we work in the world and we have a set of business principles which set out the behaviour and standards we expect from all employees. If employees do have any concerns about any possible improper, unethical or illegal practice within the organisation, we want to know about it as soon as possible. While we encourage staff to raise any concerns in the first instance with their line manager, we recognise this might not always be possible and that’s where Expolink comes in. We officially launched the service back in 2007; since then I’ve worked with the Expolink team as we’ve changed the way we transfer data between the two parties and also developed a number of new and innovative ways of keeping the service visible.
Where does the Hotline fit in with your compliance strategy and what benefits have you noted?
Compliance is just one strand of our overall business principles that set out the standards we expect and which all employees must work to at Centrica. We actively encourage staff to share their opinions, ideas and concerns, be it through team meetings, briefing sessions, at events or even through suggestion schemes. Overall, I think that staff do feel they can do so openly and our internal employee engagement scores and high entries in externally Best Place to Work competitions suggest we’re getting things right. The hotline is another method open to employees to raise any concerns they might not feel comfortable raising through another channel. The outcomes of the investigations into any allegations raised via the hotline have also led to a number of business changes including improvements to security measures and a review of some sales and expenses processes.
How do you communicate/market the Hotline service throughout Centrica?
In line with best practice outlined in the Whistleblowing Code of Practice, we regularly promote awareness of the hotline. Examples are displaying posters, articles on our internal intranet, reminders on plasma display screens throughout our calls centres, making sure the hotline is covered in our employee induction material, printing the hotline number on name badges and carrying out periodic surveys to test people’s awareness of and confidence in the hotline arrangements and then publishing those results. We also took the opportunity to raise awareness of the line and promote the value through our anti-bribery communications programme.
As a global organisation what impact do you think the Bribery Act could have on Centrica?
If anything, the arrival of the Bribery Act has underlined the importance of the hotline. The first of Centrica’s business principles deals with ‘integrity in corporate conduct’ which commits us to implementing anti-corruption policies and procedures. Our second business principle ‘ensuring openness and transparency’ commits us never to engage in bribery, any form of unethical inducement or payment including facilitation payments and ‘kickbacks’. We expect employees to report actual, potential or suspected corruption in Centrica or by any individual or organisation Centrica does business with.
Section 7 of the new Bribery Act which introduces the offence of failing to prevent bribery has implications for all commercial organisations. Although as an organisation we always endeavour to operate ethically, the new legislation resulted in a significant piece of work taking place in developing adequate procedures. Centred on the 6 principles outlined in the UK Government guidelines this included embarking on a detailed risk assessment programme across the business, updating group policies, introducing even more stringent due diligence processes, especially concerning supply chain and mergers and acquisitions, and reaffirming our measured approach to gifts and hospitality. An eLearning training package was also developed and successfully delivered.
What are the key tools for identifying business risk in the energy sector?
There isn’t one key tool for risk identification, and these identification methods aren’t unique to the energy sector; there are a number of different methods of identifying risk. These might include workshops, brainstorming exercises, interviews with key stakeholders, the use of checklists or benchmarking with other organisations. More recently, and perhaps linked to the pace of change in the external environment, for example events in Japan and North Africa and well-publicised cyber attacks, we’re tasked with bringing more of an external challenge to our risk profile. This can be done in a number of ways, for example reading news articles or attending industry benchmarking or discussion groups.
As Europe becomes more integrated, working practices change fast and often affect more than one country at a time. How do you keep abreast of what affects you and your company?
It’s important that Centrica gives proper consideration to the risks inherent in sourcing services from a variety of locations around the globe, not just in Europe. We try to ensure processes are in place to monitor potential threats to the delivery of products or services to our customers. This includes monitoring elections, changes in executive and legislative power, labour union activities, internal politics and regulatory stances, as well as international relations. We also have a cross-group committee that meets regularly to discuss emerging risks and to develop a consistent approach to managing supplier risk in the company. The increasing focus on our corporate responsibility obligations and commitment are also drivers for building a cohesive approach.
What is the split between energy regulatory compliance risk management and generic operational risk? And has this changed over the years?
Centrica and the energy sector in general, are subject to significant levels of regulatory oversight covering issues such as retail competitiveness and energy market reform. The picture can be even more confusing in North America where legislation or regulation can vary by state and province. To help mitigate these risks, we develop internal policy, and externally, engage with government, regulators, parliament and media to help build knowledge and understanding among our key stakeholders. Compliance risks are picked up as part of our wider operational risk process, but they also receive additional scrutiny from the general counsels of each of our main business units.
If you could give one bit of advice to a counterpart in risk, what would it be?
Keep the process simple. The real value of risk management comes not from the process itself or any complicated assessment methodology, but from the conversations that take place to review these risks.
We invited Tony Kelly, Group Head of Health and Safety at IPF, to air his views on international safety operations and its associated challenges faced and ethical business practice.
With regard to safety, since the company was established what major changes have you noticed in the home credit loan market and the business culture surrounding it?
Like any business where the majority of its workforce is operating in the street and customers’ homes, the challenges faced by our people change according to societal shifts. The business has only been operating for four years as an independent entity so in terms of witnessing social change I think differences are slight.
From the start, IPF made a commitment to providing a safe workplace for all of its people and that has never changed. What we have done is spend time looking at safety management models from world-class organisations and determining how we can modify existing best practice to match our needs as well as building on our own best practices. IPF prides itself on Corporate Social Responsibilty and ethical business practices and safety is an integral part of that.
As Europe becomes more integrated, working practices change fast and often affect more than one country at a time. How to you keep abreast of what affects you and your company?
There is a head of safety in every market in which we operate and I am in the head office. We work as a global team sharing developments and practices. Each of us monitors the local law along with our company lawyers and corporate insurance companies.
That’s quite a network, so changes such as Romania’s adoption of EU standards earlier this year, become known to us all very quickly. I have tried hard to foster a team ethos of constant communication using any and every method from SMS messages to video conferencing and quarterly workshops. In fact we are exploring opportunities to use our own accident incident management database, built on technology supplied by Expolink, as a type of sharepoint for safety. Not least we are a team of global travellers (I am on first name terms with KLM cabin crew!!!) so word spreads very quickly.
What health and safety challenges do you find the most prevalent when the organisation is looking to open offices in a new country?
In every walk of life there is a tendency to fall into two traps; the first being that whatever happens in our own lives is unique to us and second is the assumption that because we don’t know about something then we presume it doesn’t exist. In terms of safety, those false assumptions could lead someone to believe that a new market won’t have safety laws equivalent to UK standards simply because in other respects the country seems less developed than our own.
In fact most, countries have very similar safety laws by virtue of being members (or aspiring to be members) of international quasi-states such as the EU or by establishing government targets to render economies sustainable as in Abu Dhabi or China. And of course providing safety to people is only humanitarian ethics in the final analysis and that is a worldwide trait; no decent person would ever wish harm on another, immaterial of where they live.
The challenge therefore is to make sure you get a copy of the local safety law in a language you can read and then do a thorough comparison to international standards such as OHSAS 18001 to establish some ground-truth.
With such a large and diverse workforce what impact, if any, do you think the UK Bribery Act will have on your organisation?
Wow that’s a question not normally asked of a safety practitioner! What I can tell you is that we already have a Code of Ethics and policies and procedures aimed at preventing bribery and corruption. With no complacency at all, we are confident that we do not have a problem with corruption in our business.
The Bribery Act will, perhaps, make people think a little harder about their conduct and will also provide us with an opportunity to revisit our current policies and procedures. We will also carry out further risk assessments and take the opportunity to ensure that our workforce’s knowledge and awareness of bribery and corruption is as good as we would want it to be.
With countries that have different HR and operational practices to the UK, what are the biggest risks to the workforce and how do you best assess and manage these?
As previously mentioned, the differences are generally pretty subtle in corporate practice. We are a global company with global standards so working conditions for our own people are pretty uniform across the group. We are rolling out global training and education schemes so wherever you are you will have had the same core skills delivered to you. The market heads of safety and their teams work to localise elements to face particular risks. Often these reflect nothing more complicated than the environment or climate.
Poland is pretty chilly in winter but in Mexico snow is something largely seen only in films, so we tailor our safety skills and communications to the target audience. We assess environmental risks at a micro-scale right down to the patch of ground covered by an individual sales agent and then these are used to form risk maps at every successive layer right through the whole group. To understand this concept, consider your own neighbourhood. Where I live is an inner city pedestrianised area with high-rise apartment blocks, lots of bars, a canal and fancy marble flooring. Where I used to live was rural with a major road of fast-moving traffic nearby. The risks associated with living and working in those two areas are clearly massively different. We then map those and build layers of what I call risk pixels into a picture for a country showing the hotspots and safer areas. We monitor and review these risk maps regularly and that’s a useful tool for educating new workers and for looking at the risks for any business expansions. I believe vehemently that risks are best assessed by those that face them and, with intelligent guidance, it is local workers who generate the best mitigation plans.
So I don’t see a single biggest risk across the group; I see single biggest risks for each neighbourhood and worker. In terms of operational practices, nobody in their right mind ever looks to get hurt and one of the things I’ve learned from thirty years of working around the world is that people are the same everywhere; they just need to be shown a better way and they will quickly adopt it. We work as a global team sharing good practice which we introduce wherever we find a gap, so homogenising operational practices is not as hard as you imagine.
How do you encourage best ethical business practice internationally?
Achieving this is like pushing on an open door. I’ve worked in all sorts of places from Afghanistan to Norway and superficially you couldn’t imagine two different places. What I have learned is that the fundamentals of ethical and social mores are the same the whole world over. We capitalise on that by showing people the positive benefits of striving for the highest ethical standards that can be achieved.
Engagement, morale, operational effectiveness and well-being all grow when a business unit is run ethically and well and that’s quickly spotted by anyone who sees a standard higher than their own. That’s our business ethic, so therefore it’s our business case for insisting our ethical standards are global, internally. Of course, as I have described, the law ain’t so very different anywhere and that provides our legal argument for insisting on compliance.
Externally, we run Corporate Social Responsibility programmes in every market in which we operate and our in-house safety mentors (like a Six-Sigma Green belt but for safety) and full time practitioners are often at the forefront of them. They can vary from helping children’s homes to education programmes at colleges and schools, all to spread the concept of ethical practice and safe working wherever we are operating.
The UK Bribery Act which comes into effect on July 1st will be undoubtedly more strict than the US equivalent, the Foreign Corrupt Practices Act, as it prohibits any form of facilitation payments. The act illustrates a considerable tightening in anti-corruption legislation in the UK.
The UK legislation differs from the FCPA in three fundamental aspects; bribery of private individuals and companies, corporate failure to prevent bribery and facilitation payments. Facilitation payments are bribes made with the intention of quickening the performance of a function or activity (to which the payer is legally entitled) of a public official in everyday governmental activity, such as the issuing of permits or licenses, and not to acquire or maintain business. While in some countries it may be common to provide small unofficial payments in certain situations, in most countries the practice is illegal.
These payments are a troublesome area for the Organisation for Economic Co-operation and Development (OECD) convention as it does not validate facilitation payments as an offence. The aim of the convention is to establish binding standards and measures to criminalise the bribery of public officials in international business transactions. In 2009, the OECD council published a recommendation to all member countries urging them to revise the method of how they tackle this issue and to encourage them to prevent their domestic companies to use facilitation payments.
In the UK facilitation payments abroad are criminalised whereas in the US such payments abroad are not prohibited and there is no upper limit for them. With the introduction of the Bribery Act, UK companies will have to be extremely vigilant in their business relations with countries where facilitation payments are more commonplace. The following link provides further information on the legal status of facilitation payments from country to country http://www.business-anti-corruption.com/country-profiles/.
An example of a facilitation payment which could result in a section six offence (bribery of a foreign official) would be slipping an immigration official money in order to speed up the process of obtaining a visa. The person who makes this payment does not consider this to be overly corrupt or dishonest. This type of payment can also result in a section one offence (bribing another person) which could render the entire business accountable under section seven, which is failure of commercial organisations to prevent bribery.
As with the old law, the Bribery Act does not provide any impunity for such payments. However, the Government does acknowledge the challenges that corporations come up against in certain parts of the world and within market sectors. The total removal of facilitation payments is recognised at both national and international level as a long-term goal, which will require social and economic progress as well as continued adherence to the law, especially in regions of the world where the problem is more widespread.
Co-operation between governments, international bodies and the anti-bribery lobby is essential in the fight against corruption. In addition, individual organisations will have an integral role to play in terms of how they tackle bribery prevention. Within the six principles of the Bribery Act, the second principle of top level commitment states that in large multi-national corporations the board should be responsible for setting bribery policies. They should assign management to draft, operate and control bribery prevention measures and keeping them under constant review. Good corporate governance policies, which if enforced appropriately, can help businesses combat the risk of facilitation payments.
As the Bribery Act gets ever closer to ratification on July 1st, companies are working hard to ensure they are compliant, and that all new procedures and processes are thoroughly communicated and adhered to throughout their organisation.
Corporate Hospitality has provoked a wealth of queries regarding compliance; just where is the line drawn between celebrating a new business partnership with an afternoon at Silverstone and this being misconstrued as bribery?
The Ministry of Justice recently published Bribery Act compliance guidelines that recommended Whistleblowing Hotlines as part of an effective corporate governence and anti-bribery strategy. Expolink will be hosting a conference in early 2012 at the Institute of Business Ethics with special guest speakers from the Ministry of Justice. This follows on from the success of the seminar Expolink held in September 2010 where guest speaker Roderick Macauley addressed the audience on the impending Bribery Act.
On July 1st the Bribery Act will come into force. As part of our commitment to assisting our valued client base and the wider community with developments in corporate governance and law, Expolink is delighted to announce that we will be hosting a conference at the Institute of Business Ethics with special guest speakers from the Ministry of Justice. This follows on from the success of the seminar Expolink held in September 2010 where guest speaker Roderick Macauley addressed the audience on the impending Bribery Act.
Roderick is a policy adviser on criminal law at the Ministry of Justice, currently managing the implementation of the Bribery Act. For the past four years he has led on the development of Government policy on the reform of the criminal law of bribery, managing both the pre-legislative scrutiny of draft legislation in 2009 and the Parliamentary passage of the Bribery Act.
Dates and attendance information will be available nearer the time. For further information please contactscott.bridgen@expolink.co.uk or call 01249 661604.
