Gifts and entertainment compliance remains a cornerstone of effective risk management for organizations navigating business relationships worldwide. In recent years, the landscape of compliance risks tied to gifts, travel, and entertainment (GTE) has grown more complex. Regulatory expectations continue to change, and enforcement activity remains high, making robust gifts and entertainment policies more critical than ever.
Why Is Gifts and Entertainment Compliance Important?
While the nature of business hospitality has evolved, shaped by shifting norms, remote interactions, and new forms of corporate engagement, the risks associated with gifts and entertainment have not diminished. Compliance officers know firsthand that improper gifts or entertainment can expose their organizations to bribery, conflicts of interest, and reputational damage. Staying ahead of these challenges means continually adapting your policies and training to address emerging risk vectors.
Effective gifts, travel, and entertainment compliance today requires vigilance, flexibility, and a deep understanding of the risks your organization faces. How can your compliance team proactively manage these evolving threats while maintaining a culture of integrity?
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Gifts and Entertainment Compliance 101
First, you should have an actual policy, written and translated into other languages as necessary for your workforce. That’s always been a best practice, and most large companies already do have one—but the need for such policies has increased in the last several years, especially post COVID shutdowns. So, even something as fundamental as having a policy has become absolutely essential.
The broad contours of that travel and entertainment policies should remain consistent and thorough despite changes in current events.. These policies should warn employees against lavish gifts, travel, and entertainment for any customers, and especially for customers who represent foreign governments. They should include a pre-approval process for spending on those foreign government customers, and spell out how employees can request exceptions to whatever policy you have.
After these processes have been implemented, employees should be trained on your gifts and entertainment program policies, and then certify that they understand it. When and where it seems sensible, senior executives should keep talking about bribery risks and the importance of following policy.
It’s also important to collect data about your company-wide GTE spend and use analytics software to mine that data for insight. For example, you might discover more exception requests for a certain level of sales executive or in a certain product line. That could suggest the need for more training, or that managers should revisit their spending caps.
Ensure Flexible Gifts & Entertainment Compliance
It can seem daunting to implement policies as requirements, regulations, and events seem to change and evolve on a daily basis.
Your policies will need to reflect that uncertainty somehow. For example, you might want to tie corporate travel policies to the World Health Organization’s threat levels, or to include adjusted policies depending on the region in the world where your employees do business.
Government restrictions on travel, for example, will always supersede your corporate policy. As those restrictions change, that’s going to challenge your own policy management. Start thinking now about how to incorporate those shifts quickly and easily into your policy, and how to communicate that to your workforce.
Prioritize Compliance Program Effectiveness
Compliance officers should also appreciate the challenges evolving risks pose to their program’s effectiveness. Incidents like conflicts of interest, corruption-related fines, cyber breaches, and a wealth of others can be enormous disruptions in how business processes work—which changes the risks your business will face and your ability to mitigate them.
For example, one invaluable source of information about potential employee misconduct has always been another employee raising concerns on the hotline. How does that work in a remote world, where employees now spend much more time physically apart from each other?
Consider this from a program management perspective: your anti-corruption control of employees speaking up about potential misconduct is weaker because they’re less likely to witness suspicious activity. So, your compliance program must try to introduce a suitable compensating control to keep the overall ABAC program effective.
What would that compensating control be? Perhaps more monitoring of employee communications and spending, although wrongdoers could find clandestine ways to violate policy if they were committed to it. Or you might need to focus more on ethics training, to keep potential wrongdoers away from temptation.
Those are the sorts of policy challenges compliance officers are likely to encounter. Gifts, travel, and entertainment will always be a key part of business transactions, and compliance officers need to ensure their gifts, travel, and entertainment policies adjust with changing expectations, while still ensuring comprehensive compliance and employee engagement.
Interested in learning more about how to optimize your gifts and entertainment compliance program? Hear from the experts on gifting compliance best practices.
Matt Kelly is an independent compliance consultant and the founder of Radical Compliance, which offers consulting and commentary on corporate compliance, audit, governance, and risk management. Radical Compliance also hosts Matt’s personal blog, where he discusses compliance and governance issues, and the Compliance Jobs Report, covering industry moves and news. Kelly was formerly the editor of Compliance Week. from 2006 to 2015. He was recognized as a "Rising Star of Corporate Governance" by the Millstein Center in 2008 and was listed among Ethisphere’s "Most Influential in Business Ethics" in 2011 (no. 91) and 2013 (no. 77). He resides in Boston, Mass.