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Forgive the pun, but it probably won’t come as a shock that the energy industry ranks near the top when it comes to bribery and corruption risk. Some of the largest enforcement actions ever under the U.S. Foreign Corrupt Practices Act have taken place within that sector, including a $365 million dollar penalty against Italian oil and gas company Eni S.p.A. and its Dutch subsidiary Snamprogetti Netherlands B.V. in 2010. And, as the fallout continues in the Brazilian Petrobras scandal—which has thus far mounted up to $2 billion in reported bribes, kickbacks and money laundering and left tens of thousands of people without jobs, according to Trace International—the financial penalties could easily eclipse past fines.
Energy companies already fight public perception when it comes to bribery and corruption. In the wake of major corruption scandals—whether you’re looking at bribery allegations against wind energy farms in Spain or how corruption at Unaoil leads to political instability and fuels terrorism—companies in this vulnerable sector need to strengthen their due-diligence processes. But why is the industry so vulnerable?
Given these vulnerabilities, companies need to implement due-diligence processes that dill deeper to uncover and mitigate risk.
To reduce risk, companies need a program that is supported from the top and includes education and training for internal staff as well as third parties working on your behalf. Likewise, companies need to implement a due-diligence and on-going monitoring process that takes a broad view, encompassing their entire network of partners, suppliers, agents and outside parties. What should it look like?
Are you confident in your current due-diligence and on-going monitoring process? If you’re in the energy industry, you need to be—otherwise, you could find yourself facing some shockingly bad press and significant financial and reputational damage.