Gifts, entertainment, and travel expenses often fall into a grey area where exceptions are more the norm than the exception. That's why having a well-thought-out and tailored gifts & entertainment process is absolutely essential.
What is considered excessive spend? How are exceptions handled? How is this process rolled out across the organization? What helpful data can come from the G&E process? The answer to these questions is likely to vary based on the geographical location, local customs, and third parties you are dealing with. However, regardless of these factors, one truth will remain consistent: these expenses can create organizational risk by influencing employees to act in breach of his or her duties.
Proper gifts & entertainment management is the key to not only mitigate these risks but also promote compliance and ethics within your organization. So whether you’re currently in the process of restructuring your G&E program or are just starting to consider this undertaking, here are a few reasons why you should consider revamping your gifts & entertainment process.
1. Recent Enforcement Actions
Recent enforcement actions have reminded the compliance community that there is no such thing as a “safe zone” for gifting. Although it might feel like tickets to a sporting event or concert are generally approvable requests, that is not always true. Case in point: recent enforcement by the U.S. Securities and Exchange Commission (SEC) fined Telefonica Brasil $4.13M over World Cup tickets purchased for government officials.
More recently, the Swedish network equipment giant, Ericsson, was fined over $1B for bribing public officials for years. The company had a longstanding scheme to pay bribes and falsify records all while failing to implement reasonable internal accounting controls. While many global officials from many countries were involved in this scandal including Vietnam, Indonesia, and Kuwait the longest-running bribery scheme was in China, which occurred for 17-years. The scheme involved Ericsson subsidiaries providing millions of dollars to fund travel expense accounts in China that covered gifts, travel, and entertainment for foreign officials as well as fake contracts for services that were never performed. In the end, Ericsson had to settle with both the SEC and the Department of Justice (DoJ).
These unfortunate and highly publicized situations could have been avoided with a proper gifts & entertainment process in place. The G&E process would have flagged these requests for compliance review because the receiving party is government contractors, which in most situations is a major red flag. By tracking G&E requests in the aggregate, the right tool would have helped the compliance team spot these requests and mitigate the risk long before the enforcement agencies came knocking.
2. The Evolution of Compliance Technology
Many gifts & entertainment processes are not being supported by the latest technology which leaves gaps for improvements to be made. If you are currently using a technology solution for G&E but don’t have a central repository to store all requests, workflows to automate the approval process, or access to reports on gifting trends, it might be time to look for a new solution.
On the other hand, plenty of G&E programs are supported by manual processes including spreadsheets and/or email approvals, even at large global organizations. While these methods might “get the job done” they are ultimately holding your compliance program back from being best-in-class (and probably giving you a headache in the process).
Compliance technology is constantly evolving to better fit the needs of robust global compliance teams, so make sure you’re up-to-date on the latest solutions available and leverage them properly to increase the output and efficiency of your organization. When you are considering revamping your gifting process, technology is often a great place to start in order to launch a major transformation.
If you would like to see a use case focused on the impact that gifts & entertainment software can have on an organization, we suggest watching our webinar featuring Dyson. Watch the on-demand recording to learn how to elevate your G&E process, review best practices, and examine the role technology plays in streamlining processes. Our expert speakers from Dyson and GAN Integrity share their personal experiences establishing and revamping gift & entertainment processes.
3. Impact on Overall Ethics and Compliance Strategy
Last, but certainly not least, gifts & entertainment requests should play an important role in your overall compliance and ethics strategy. It’s an opportunity to both educate the workforce and learn more about the way your organization functions.
Plus, as we’ve mentioned, properly managing your G&E program can really save you down the line because it is such a proactive process. Your G&E program should give you insights into which third parties and employees come with the biggest risks which can be early warning signs of other risky behaviors to come. Managing this process should provide you with valuable insights which are why G&E processes matter not only to the compliance function but to the overall health of an organization.
Insights might include who your employee base is spending gifts & entertainment dollars on, what the totality of all employees giving to another entity is (rather than what a single employee is giving to that entity), which teams or individuals submit the most requests, geographical trends, and average approved/denied gifting spends. This information can help you decide where the thresholds should be, what local customs you should be considering, and where the biggest risks lie. It can also impact other areas of compliance, including third party due diligence, conflicts of interest, and overall risk management. When executed properly, your G&E process will be one piece of a holistic approach to your compliance program.
So, why revamp your gifts & entertainment strategy? Ultimately, it’s about the pursuit of the elusive best-in-class compliance program that reduces risks across the entire organization. To keep reading about G&E, we highly recommend downloading our latest eBook, The Definitive Guide to Gifts & Entertainment Management. The eBook is packed with recommendations on how to best structure your gifts & entertainment process for maximum impact. Whether you’re currently in the process of updating your G&E program or are just starting to consider this undertaking, this eBook will provide you with valuable guidance along the way.
Interacting with high-risk parties and government officials in the life sciences and extractive industries sectors
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