A common mistake made by supply chain executives is viewing corrupt behavior in binary terms: associates are either corruptible or incorruptible. This view is based on the mistaken notion that ‘good people’ are beyond reproach. To view the issue through this prism, in zero sum terms, is to misunderstand human nature. The reality is far more nuanced. Each of us has our own individual pressure points and therefore susceptible to corruption given certain elements, based on a theory developed by Donald Cressey known as the Fraud Triangle. These three elements are opportunity, rationalization, and pressure.
Business relationships within supply chains are intrinsically close. Suppliers, merchandisers, auditors and inspectors interact on a daily basis, across far flung locations in the developing world, often removed from corporate purview usually in the US or Europe. An apparel merchandiser may run a continuous, multi million dollar program with a single supplier in South China, for example. A leather specialist may visit the same supplier in Indonesia each week for product inspections and an auditor, based in South India, may be responsible for measuring the workplace conditions across just a handful of active suppliers. The risks presented by these scenarios are clear. For further details, please view our insight Conflict of Interest: A Growing Supply Chain Challenge .
While it is important for all parties to work collaboratively, it is crucial that professional boundaries are clearly stated and transparent. Interacting on a daily basis, personal relationships develop and professional boundaries blur leading to an environment where favors become exchanged, with or without the intention of wrong-doing. This is the quintessential slippery slope. Omega has seen compromised relationships begin with a simple pick up from the train station, develop through complimentary lunches or gifts from the supplier’s showroom then, finally, into overt bribery. Bribery may be masked as cash in envelopes to pay for ‘transportation’ or ‘refreshments’ with both sides fully understanding the intent. Relationships quickly become compromised and associates succumb to corruption, with rationalization as a means to breaking the ethical barrier and opening Pandora’s Box. I’ve done this once already; it isn’t hurting anyone; everyone else is doing it, so why don’t I also help myself?
The fast growing consumer class in Asia, with all the temptations that provides, is a contributing factor also. As such, it is crucial that opportunities to behave dishonestly are carefully regulated and the nuances and gray areas, which open the doors to corruption, are fully understood.
What can be done to minimize your exposure?
Omega recommends that organizations invest in scenario-based training. These should be classroom initially with refresher courses, via e-learning, provided thereafter. The purpose should be to provide associates with a clear understanding of how to behave when opportunity arises. For example, what is the correct course of action should a supplier courier a set gift vouchers to the office? Should the value of the gifts be taken into consideration? Should they be accepted, reported, rejected or any combination of the above? Also, is it permissible for an associate allowed to purchase an item off the production floor while visiting the factory? What if he or she obtains a receipt? Are the circumstances different if the supplier has an onsite retail outlet? For additional insight on this topic, read our article A Proactive Approach to Supply Chain Corruption.
Whatever your organization’s standards are, it is also important to be clear as to what the employee is expected to do should there be any uncertainty or questions regarding an offer or receipt of a gift, a bribe, an invitation. Under these circumstances, Omega recommends that employees enquire with their direct manager, or if not appropriate, as may be the case, if the direct manager may be party to the corruption, then senior management.
Managing an anti-corruption program over hundreds, or even thousands, of suppliers across multiple countries can be daunting. Omega has vast experience dealing with supply chain integrity risks. For more information on how Omega can support your business, please contact us.