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Compliance in Emerging Markets: Implementing Your Program (Part 3)

By GAN Integrity

One-fits-all doesn’t work when it comes to compliance programs, and that’s especially true in emerging markets. Whether you’re investing in China or in the Middle East, cultural practices can get companies into trouble, from customary bribes to using connections to get contracts. Don’t make the mistake of thinking that these traditional practices are the only way of doing business.

In Part One of this blog series, we discussed how to assess your target country or region and identify the challenges you’re likely to face. In Part Two, we explored ways of mapping out the risks for your business model in a specific emerging market. In this article, we cover the third and most important step: implementing an effective compliance program.

Step #3: Implement an Effective Compliance Program for the Specific Market 

After identifying the specific corruption risks your business might contend with when investing in a particular market, you should address them specifically in order to design and implement a compliance program that can effectively mitigate these risks. As you’re getting an overview about the compliance requirements in your specific country, pay attention to the cultural aspects of investing in emerging markets, such as customary gifts.

Take these cultural aspects into consideration when you are training employees or rolling out policies. Explain that, even if these are common practices, the company does not want to participate because they could be found in violation of the FCPA or UK Bribery Act.

Even if you or your employees are met by officials who try to extort bribes from you, insist that anyone working for or on behalf of your company with stick to the organization’s Code of Conduct and be persistent and it will pay off. Governments in many emerging markets realize that ranking high on corruption indexes directly impacts investments and many have taken several steps to crack down on official corruption, such as creating one-stop-shops or establishing online government services to minimize contact between investors and local administrations. Notwithstanding, businesses investing in emerging markets should carefully consider their compliance programs.

With that in mind, here are seven crucial elements for an effective compliance program in an emerging market:

  • Conduct a risk assessment. (See Part 1 for more details.)
  • Conduct comprehensive and professional due diligence on third parties. Keep records of all questionnaires and other relevant documents, so that you can prove your due diligence if necessary.
  • Create transparency about giving and receiving gifts. Provide your employees with a system that makes it easy for them to know when they can or cannot accept a gift.
  • Get local help with understanding best practices and local culture. Sometimes rules are not enforced in the ways you might think.
  • Stay up-to-date on new and upcoming legislation that affects compliance and anticorruption. Rules and regulations may change more frequently than in countries with more established laws.
  • Inform your employees about compliance risks in general, and train them on how to best handle specific situations.
  • Evaluate the effectiveness of your compliance program from time to time and make sure to adjust the program accordingly.

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