Company Measure: Concerning Positions with an Increased Level of Risk or Above Low

Posted in Internal Controls, Risk Management on February 27, 2024
Company Measure

The company measure risk positions, according to the result of the corruption risk assessment, are found to have a level of risk above low level and require additional monitoring and attention from the compliance team. All risk positions that, according to the result of the corruption risk assessment, are found to have a level of risk above low need additional monitoring and attention from the compliance team.

Company Measure

Company Measure: Checking while Hiring and Transferring Employees

It is important to be cautious while hiring and transferring employees. It is necessary to make sure to what extent such hiring or transferring is relevant and appropriate.

To check a candidate, the company may take the following actions:

  • To discuss with the candidate the compliance policy of the company in the interview and to try to form an opinion on whether they understand and accept the importance of compliance;
  • To check how exactly the qualification of the candidate corresponds to the position;
  • To obtain recommendations from the candidate’s previous employers;
  • To check in open sources the presence of information that may indicate the involvement of the candidate in bribery;
  • To check whether the job in the company is not offered in exchange for improper assistance by the candidate to the company of the previous place of work;
  • To check that the purpose of employment is not to ensure loyalty to the company; and
  • To check links with state officials.

The following are examples of situations concerning checking candidates:

  • The approval of the employee who is a candidate for transferring to a position with an increased level of risk and concerning whom there are records of non-compliance or violation of compliance procedures will be inappropriate in most cases; or 
  • The situation when concerning the main or only candidate for the newly created position of a consultant to the head of the company, information about the involvement of the person in corruption-related transactions is found in open sources, and the person refuses to give any explanations; or 
  • The person who previously worked only in state-owned companies and, according to the registers, possesses considerable wealth is a candidate for the position of an employee of the procurement department. At the same time, the average income that the person can receive in this position will not be enough to support the candidate’s wealth;

Such examples of detected information about candidates for positions raise reasonable doubts that such candidates will follow the anti-corruption procedures of the company.

Company Measure

Company Measure: Compliance Control of Incentive Elements to Encourage Employees

In addition to external factors that can stimulate employees to commit corruption violations, there are also internal ones.

In particular, among these factors, such processes of a company should be pointed out:

  • Payment of bonuses to employees;
  • Setting target indicators;
  • Other incentive elements of reward;
  • Staff assessment; and
  • Promotion.

That is why, if the company has set incentive elements, the processes concerning positions with an increased level of risk should be reviewed periodically to ensure sufficient guarantees that corruption will not be encouraged.

For example:

  • Suppose the executive receives the bonus, the size of which depends on the number of contracts signed by the company. In that case, they may be tempted to bribe or attract an intermediary and “turn a blind eye” to the transfer of a bribe to ensure the contract signing.
  • If an employee may be fired for failing to achieve sufficiently aggressive sales goals, the result may be as in the first example.

Therefore, it will be appropriate to include representatives of the compliance function in the list of persons involved in reviewing the company’s procedures for awarding and/or setting target indicators or obtaining approval of the compliance function before their introduction or change.

But on the other hand, such incentive elements can be used to motivate employees to meet the company’s compliance requirements. For example, for such positions and senior and middle managers, a target indicator or key performance indicator can be set as “no violations of compliance procedures and policies introduced in the company,” which can have some weight in determining the size of a bonus.

Company Measure

Company Measure: Compliance Declaring or Certification

Another compliance measure concerning positions with an increased level of risk is declaring. Herein such declaring should not be confused with the declaring made by officials, providing information on property and other personal information.

This declaring measure involves providing employees written confirmations of their compliance with the company’s anti-corruption policy by completing questionnaires. Therefore, to avoid unnecessary confusion about the name on the part of employees, this process can also be called certification.

The frequency of declaring is usually once a year. But in some situations, the compliance function can decide to require declaring more than once a year. For example, according to which internal and/or external investigation is conducted, if facts of corruption are found, the company has a low compliance culture, etc., according to the results of an anonymous survey.

The survey process should include the following:

  • Employees in positions with an increased level of risk;
  • Senior management of the company;
  • Persons from the governing body of the company; and
  • Employees of the compliance function.

At the same time, declaring can be an independent process and concern only the anti-corruption compliance system and a component of the larger compliance declaring process. For example, additionally, it can include questions about insider trading.

The following questions can be used in the compliance declaring questionnaire:

  • Are you familiar with the company’s code of conduct, compliance policy, applicable anti-corruption laws, and their requirements?
  • Do you confirm that you agree with their requirements and meet them?
  • If you answered “no” to any questions earlier, comment on the answer.
  • Have you had any conflict of personal interest with the company’s interest while working for the company?
  • If you answered “yes,” comment on the answer.
  • Are you aware of any cases of violations of the company’s code of conduct, compliance policy, and applicable anti-corruption laws by the company employees?
  • If you answered “yes” to the previous question, did you report this to your supervisor or the Hotline?
  • If you answered “no” to the previous question, comment on your answer.
  • Have you ever had to bribe a state official or employee of a state or municipal company while performing your duties?
  • If you answered “yes” to the previous question, comment on your answer.
  • Have you ever had to give a bribe in any form to a representative of a company’s counterparty to maintain, develop or establish relations between the company and such a counterparty?
  • If you answered “yes” to the previous question, comment on your answer.
  • Have you been a state official for the previous 12 months, or are you associated with any state authorities or institutions (for example, based on a civil contract)?
  • If you answered “yes” to the previous question, comment on your answer.
  • Does any member of your family and/or any close relative hold a position in the state organizations that perform regulatory, control, supervisory, permitting, and similar functions concerning the company?
  • If you answered “yes” to the previous question, comment on your answer.
  • Have you received offers from suppliers or competitors of the company to obtain personal material benefits?
  • Did you accept such an offer if you answered “yes” to the previous question?
  • If you answered “yes” to the previous question, comment on your answer and indicate from what suppliers or competitors.
  • Have company counterparties offering you gifts and/or invitations to any entertainment events influenced your decision while performing your official duties in the company?
  • If you answered “yes” to the previous question, did you accept such gifts and/or invitations?

In large or medium-sized companies holding events that include or may include employee surveys requires significant resources from the compliance function to collect and further process questionnaire forms. Such processes are, in particular, compliance certification and compliance risk assessment.

Suppose employees of the company have corporate e-mail boxes. In that case, such processes can be partially simplified by collecting questionnaires in electronic form and uploading the answers to the database for easy processing.

Step-by-step instructions for creatin

g a questionnaire form and database that will consolidate all the answers to the questionnaires in the table for easy processing will be provided. 

Final Thoughts

Risk can be measured in a variety of ways in finance and investing. Standard deviation, which measures the dispersion of results from the expected value; the Sharpe ratio, which measures the return of an investment in relation to its risk; and beta, which examines the systematic risk of an investment to the overall market, are some of the most common methods for measuring risk.