Bribery Act will stifle UK firms abroad: IRM

And members of the Question Time Panel also raised concerns over the reliability of supply chains in the current economic climate and the ‘real threat’ of strikes and sabotage that the UK government may face from its workers.

The new UK Bribery Act was passed by the UK parliament earlier this year, having received Royal Assent on April 8, and will become law next April.

It aims to provide a new, modern and comprehensive scheme of bribery offences that will enable courts and prosecutors to respond more effectively to bribery at home or abroad, the Ministry of Justice explained.

The Act will provide a more effective legal framework to combat bribery in the public or private sectors, including any dealings a UK company has overseas. It creates a discrete offence of bribery of a foreign public official and aims to help tackle the threat that bribery poses to economic progress and development around the world.

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It will place a penal penalty on directors if they, or people within their organisation, break the new law.

But experts gathered in London recently for the IRM conference argued that in some countries certain payments, which could be seen as bribes, are part of life and facilitate trade. Outlawing them for UK companies places its organisations at a disadvantage, they added.

“It is clearly an issue that is causing a big challenge in the humanitarian and the aid sector which I work in,” said Pesh Framjee, Head of Non Profits for the audit, tax and advisory service, Crowe Clarke Whitehill LLP. “In situations whereby you have an emergency and you have to get trucks through customs and someone will not open a file until some dollars have been passed across the table.

“Understanding now what the bribery act says, even on issues like facilitation payments, is going to be very challenging for UK organisations working in the private sector and the voluntary sector. Because the same rules do not apply across the world and we are not going to be playing on level playing fields when we compete for work, business and contracts across the world,” he explained.

The difficulties of trading abroad are magnified in the current economic conditions with many organisations in supply chains likely to be at risk, the panel agreed.

As such third-party risk is one of the big issues facing organisations currently and will continue to be so going forward, said John Abbot, leader of RSM Tenon’s UK Corporate Governance, Risk Management and Assurance practice.

“It covers a whole range of issues from the legal side to having a contract and being able to access a third party from a governance and audit point of view. There is a big relationship issue on this–how you work together, how you want to be transparent and how you want to monitor them as well. You are only as strong as the weakest link in that supply chain and there will be many organisations out there, particularly in the current financial crisis, which might not be financially viable at the moment,” he warned.

Panelist Mike Sommers, Non Executive Director and Chairman of the Departmental Audit Committee for the UK Government’s Department for Work and Pensions, focused on a risk issue nearer to home.

He warned that the current cuts to spending in the Department for Work and Pensions, which has seen them run scenarios of up to a 40% decrease in spending, could result in sabotage from disaffected workers.

“On a personal basis I have almost thrown the risk register out and said the biggest risk we have now is industrial action and sabotage,” suggested Mr Sommers, who emphasised that this is his personal opinion and not that of his department.

He pointed out that in this age of increased information technology it is very easy to cause ‘huge grief’ with small action and cited the taking of computer disks containing information as an example.

“You can imagine if you want to cause furore and you are disaffected it would be very easy to cause such sabotage … You cannot go around saying these people are overpaid, these people need their pensions cut and that these people need to be sacked more easily and then say why are you not excited about working in this new organisation. So it is a huge risk,” he said.

In a separate session during the event headline speaker Roger Bootle [pictured, left], a leading economist and managing director of Capital Economics, warned all attendees that the global financial outlook remains a severe concern and a major risk.

He added that the three biggest risks are Western economies falling back into recession, a severe weakening in house prices, especially in the UK, and the potential break-up of the Euro.

Mr Bootle’s central scenario is that the world’s economy will remain fragile, with growth strong in the developing markets but weak in the developed world. But a fall back to a recession in the West is a ‘significant risk’, he told delegates.

Mr Bootle predicted that house prices in the UK could well see a 20% to 40% correction in the next few years.

“Big risk number three is the significant rolling problem of defaults and weakness in the banking system across the (English) Channel and fears of one or more countries leaving the Euro. The break up of the Euro is I think a significant risk,” he said in his presentation, The Economic and Financial Outlook—Recovery or Relapse?

A major fear for global corporates is, in the light of the economic problems, a potential surge in trade protectionism and resultant narrowing of global trade. This concern is not as ‘fanciful’ as you might think, warned Mr Bootle.

“American patience is running out,” he argued. “If it slaps trade protection measures on China and other emerging market countries we get involved in a trade war and the whole global economy implodes, it becomes a lot less globalised.”

The Institute of Risk Management (IRM) has announced that Alex Hindson, Head of Group Risk at Amlin, has been elected as chairman of its board of directors. Mr Hindson was previously IRM deputy chairman.

Two new deputy chairmen have also been elected. They are Richard Anderson, European GRC Regional Practice Leader at Wipro Consulting and Chris Charman, an independent risk consultant.

IRM Chief Executive Steve Fowler said “We are delighted that Alex has been elected as IRM chairman for the coming year. He has been an active deputy chairman supporting IRM in a number of fields, in particular our member work on the Solvency II project. Likewise, Richard Anderson and Chris Charman have both been long-standing supporters, and living examples of professionalism in risk management. We look forward to working together.”

Alex Hindson, the new IRM chairman, said “My deputy chairmen and I are looking forward to steering the institute into the next decade as effective management of risk climbs ever-higher up the organisational agenda. Professional competence and credibility are of increasing importance and the institute has a vital role to play in supporting the profession.”