Legal Risk

Source of Influencers

Internal
Internal procedures need to be able to detect corrupt employees sourcing suppliers for personal gain. You should also be able to identify any non-legally compliant requirements that have been specified - remember, what is legal in one country is not necessarily legal in another; think about the countries your goods pass through en-route to their destination.

External
Breach of regulations, laws and statutes may be widespread in the countries in which you operate, so diligence is required to ensure that your contractors or associated countries remain compliant.

Organisational Consequences

Operational
Customs delays, confiscation or seizure of goods, and the onerous remedial action required thereafter.

Financial
Fines and financial penalties could be levied for non-compliance; delayed shipments could result in cancelled orders; there may be additional costs that have to be absorbed if an alternative supply has to be sourced.

Reputational
Laws are generally made for good reason, and a company that finds itself on the wrong side of laws concerned with working conditions, human rights, the environment, corruption, or even those companies who are complicit in avoiding taxes, will find consumers quick to judge.

Sustainability Consequences

Social
There are ten principles held by the United Nations Global Compact (UNGC) under the headings of Human Rights, Labour, the Environment and Anti-Corruption - if your organisation isn't vigilant, it could easily find itself failing some, or all, of these.

Environmental
Domestic and international environmental law-makers find themselves under increasing pressure to act quickly, so it is imperative that environmental legislation is monitored and adhered to, especially as governments have been enforcing massive fines as a disincentive to non-compliance.

Economic
Legislative compliance is seen as very much a basic requirement of an organisation so any non-compliance is likely to be viewed dimly by investors or consumers, with a corresponding drop in sales and/or funding.

• Encourage your key suppliers to participate in the CIPS Sustainabiliy Index, which will help identify any potential risks in this area
• Encourage and influence your organisations management to adopt a best practice approach in how they communicate their bribery and corruption policies both internally and externally
• Build in appropriate screening questions that require current and potential suppliers to declare past convictions for bribery and corruption, or non-legislative compliance in any of the countries that they trade in
• Ensure any judgements you make are evidence-based
• Engage with internal and external experts where available to supplement your knowledge
• Propose modifications to your organisations existing polices as appropriate
• Take steps to understand potential suppliers past record in respect to any exposure(s) and prosecutions in the areas of environmental compliance, bribery and corruption abuse, health and safety violations, or tax compliance
• Ensure you have undertaken a comprehensive review of all your suppliers and their supply chain to identify if any goods / services are currently sourced for or from the USA
• Take steps to understand where tin, tungsten, tantalum and gold are present in your supply chain and how this use may be subject to controlled minerals legislation (seek expert advice in this area if you are in any doubt as to your exposure).

• CIPS legal update
• Dodd-Frank Act
• H&S executive guidance - tools and templates aimed at smaller companies
• International labour standards
• International environmental law resource
• International environmental agreements database
• IRM bribery risk guide
• UKELA website
• UK government guidance on conflict minerals