How to assess company's business courtesy risks?

Before constructing compliance programs, organizations must assess their risks and determine their tolerance for these risks. This corporate risk assessment determines how a company should tailor its global compliance program to operations in a specific country.

International companies within the FCPA's ambit should look carefully at the ways in which their Chinese operations may present corruption risks different from those in countries such as Brazil, India, Mexico, and Russia. In China, the confluence of pervasive public corruption, a keen enforcement focus, the ubiquity of "foreign officials," and the prevalent role of business courtesies require companies to tailor their global compliance regime to address the risks posed by gift and entertainment expenditures.

In developing an FCPA risk picture, a multinational company should focus on the most frequent risky interactions with government officials.  The risk assessment should identify whom within the government the company interacts with and what the interactions look like. It can rely on both qualitative and quantitative data to do so.

Qualitative information-human intelligence-usually provides the starting point. To gain an accurate understanding of the types of governmental interactions and the dangers they may pose, corporations should involve a cross-section of employees in the process, including those in internal audit, legal, compliance, and finance, as well as members of the business line and company leaders. These employees' input about the qualitative nature of the company's interaction with government officials in the region will provide necessary insight and aid with organizational buy-in regarding any mitigating measures that evolve from the review. Candid evaluations from employees on the ground in all relevant areas of the company are invaluable. These employees can, for instance, explain the attitudes of governmental actors and whether they expect gifts and entertainment from their private-sector counterparties. They can also provide a good picture of the attitudes of company employees and whether they will resist controls on business courtesy expenditures. Organizations may augment such direct input with employee focus groups and opinion surveys. Ultimately, the nuanced understanding that qualitative data provides is vital not only for assessing and mitigating the risk, but also for harmonizing the necessary controls as effectively as possible with current business practices.

If available, the company should try to supplement this information with quantitative data. In the area of business courtesies, mechanisms like expense reports, audits, and past compliance reports can all help underpin the assessment of and develop an accurate accounting of the officials benefiting from business courtesies, the frequency of such courtesies, and their value. As with the qualitative information, these findings will directly shape the controls surrounding gifts and entertainment.

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