Gifts, travel, and entertainment expenses often fall into a grey area of corporate compliance, where such expenses are acceptable in theory but raise a host of tricky issues in practice. That's why a thoughtful, well-tailored “TG&E” policy is so essential to modern compliance programs.
For example, what qualifies as excessive spending on gifts and entertainment? How are exceptions to your spending policy handled? How is this process rolled out across the organization? What helpful data can come from the TG&E process? The answer to these questions is likely to vary based on the geographical location, local customs, and third parties you are dealing with. Regardless of these factors, however, it’s always true that these expenses can create organizational risk by influencing employees to act in breach of his or her duties.
Proper gifts & entertainment management is the key not only to mitigating these risks, but also to promoting compliance and ethics within your organization. So whether you’re restructuring an existing G&E program or are just starting to consider this venture, here are a few reasons why you should consider revamping your gifts & entertainment process.
1. Enforcement Actions
The annals of regulatory enforcement are filled with sanctions against corporations where sloppy control over gifts and entertainment played a role. Although it might feel like tickets to a sporting event or concert are generally approvable requests, that is not always true. Case in point: in 2019 the U.S. Securities and Exchange Commission (SEC) fined Telefonica Brasil $4.13M over World Cup tickets purchased for government officials.
Even worse, the Swedish network equipment giant Ericsson was fined more than $1 billion for bribing public officials for years. The scheme involved Ericsson subsidiaries providing millions of dollars to fund travel expense accounts in China that covered gifts, travel, and entertainment for foreign officials as well as fake contracts for services that were never performed. In the end, Ericsson had to settle with both the SEC and the Department of Justice (DoJ).
These unfortunate and highly publicized situations could have been avoided with a proper gifts & entertainment process in place. The G&E process would have flagged these requests for compliance review because the recipients were government contractors, which in most situations is a major red flag. By tracking G&E requests in the aggregate, the right tool would have helped the compliance team spot these requests and mitigate the risk long before the enforcement agencies came knocking.
2. The Evolution of Compliance Technology
Many gifts & entertainment processes are not supported by the latest technology; this leaves gaps for improvements to be made. If you are currently using a technology solution for G&E but don’t have a central repository to store all requests, workflows to automate the approval process, or access to reports on gifting trends, it might be time to look for a new solution.
On the other hand, plenty of G&E programs are supported by manual processes including spreadsheets or email approvals, even at large global organizations. While these methods might get the job done, ultimately they hold your compliance program back from being best-in-class (and probably giving you a headache in the process).
Compliance technology is constantly evolving to better fit the needs of robust global compliance teams, so make sure you stay current on the latest solutions available. Leverage those solutions wisely to increase the output and efficiency of your organization. When you are considering revamping your gifting process, technology is often a great place to start in order to launch a major transformation.
If you would like to see a use case focused on the impact that gifts & entertainment software can have on an organization, we suggest watching our webinar featuring Dyson. Watch the on-demand recording to learn how to elevate your G&E process, review best practices, and examine the role technology plays in streamlining processes. Our expert speakers from Dyson and GAN Integrity share their personal experiences establishing and revamping gift & entertainment processes.
3. Impact on Overall Ethics and Compliance Strategy
Gifts & entertainment requests should play an important role in your overall compliance and ethics strategy. It’s an opportunity both to educate the workforce and to learn more about the way your organization functions.
Plus, as we’ve mentioned, properly managing your G&E program can save you grief down the line because G&E management is such an active process. Your G&E program should give you insights into which third parties and employees come with the biggest risks, which can be early warning signs of other risky behaviors to come. Managing this process should provide you with valuable insights — not only to the compliance function, but to the health of your organization overall.
For example, you could identify the biggest recipients of your employees’ G&E spending, the total spending all employees make for another entity (rather than what individual employees are giving to that entity), which teams or individuals submit the most requests, geographical trends, and average approved/denied gifting spends.
This information can help you decide where the thresholds for spending should be, what local customs you should be considering, and where the biggest risks lie. It can also affect other areas of compliance, including third-party due diligence, conflicts of interest, and overall risk management. When executed properly, your G&E process will be one piece of a holistic approach to your compliance program.
So, why revamp your gifts & entertainment strategy? Ultimately, it’s about the pursuit of the elusive best-in-class compliance program that reduces risks across the entire organization.
To keep reading about G&E, we highly recommend downloading our latest eBook, The Definitive Guide to Gifts & Entertainment Management. The eBook is packed with recommendations on how to best structure your gifts & entertainment process for maximum impact. Whether you’re currently updating your G&E program or are just starting to consider this undertaking, this eBook will provide you with valuable guidance along the way.
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