February 10, 2010

Global Sourcing: The Next Level of Risk

As I mentioned in my last posting, the Justice Department is becoming more serious about Foreign Corrupt Practices Act (FCPA) enforcement and the recent sting operation in Las Vegas certainly reflects the hard-line, somewhat insidious, strategy of their new playbook. While the indictments involved individuals in the defense/arms industry, I expect enforcement to increase across many industries.

Aside from the recent events foreboding stricter enforcement, some of my peers are also predicting a surge in activity. For example, a former US Attorney assured me this sting was only the beginning and that two more will emerge in the coming months. Dan Karson, an executive managing director for Kroll, said the recent sting operation has “sent chills” down the spine of small and mid-sized businesses who may have falsely hoped the Justice Department’s interest in FCPA was reserved for global Fortune 500 companies.

This increasing level of FCPA enforcement has major implications for companies and how they choose supply chain partners. In the past, a partner’s misconduct may have impacted the organization but didn’t necessarily come with the immediate publicity and massive fines experienced today. This is why companies who never considered making the investment are now starting to consider extending their internal compliance expectations and training throughout their supply chain. Cultural and language barriers aside, this remains a daunting task.

Global sourcing relationships have always been about trust and service – but this is new territory that stretches the boundaries of these relationships. The two most important factors in mitigating an FCPA violation in this instance are selecting the right vendor, supplier or agent from the start and developing a process that ensures transparency. I will be writing much more on this topic as the year moves forward. Let me know what you think – can you expect a vendor, supplier or agent to act in accordance with a company’s compliance policies, procedures and guidelines?


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About Me

David Childers
of EthicsPoint

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Favorite Quotes:

Ronald Reagan
There are no easy answers, but there are simple answers. We must have the courage to do what we know is morally right.

John Quincy Adams
If your actions inspire others to dream more, learn more, do more and become more, you are a leader.

We are what we repeatedly do. Excellence, therefore, is not an act but a habit.

Ray Kroc
The quality of a leader is reflected in the standards they set for themselves.

John Maxwell
The first step to leadership is servanthood.