Treasurer's Bribery Risk Update

• Author: David Shapiro
• Date: 01 November 2014
• DOI: http://doi.org/10.1002/jcaf.21998
• Published date: 01 November 2014

11

© 2014 Wiley Periodicals, Inc.

Published online in Wiley Online Library (wileyonlinelibrary.com).

DOI 10.1002/jcaf.21998

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David Shapiro

Treasurer’s Bribery Risk Update

INTRODUCTION TO THE

TREASURY FUNCTION

AND BRIBERY RISK

The treasury func-

tion has long been

concerned about

the proper initiation,

authorizing, recording,

processing, and report-

ing of cash receipts and

cash disbursements

(collectively, the cash

management system).

Enforcement activity,

including the threat

of potential enforce-

ment, emanating from

regulators such as the

U.S. Department of Justice (the

Foreign Corrupt Practices Act

[FCPA]) and the U.K. Serious

Fraud Office (the U.K. Bribery

Act of 2010), with its high costs

and associated threats to reputa-

tion and goodwill, is a familiar

stick to treasurers. The custom-

ary carrot of generous compen-

sation with fringe benefits and

long tenure with portability of

job function is ever more valu-

able in the modern global econ-

omy. Increased demands from

regulators (e.g., Sarbanes-Oxley

Act, Dodd-Frank Act) have con-

tributed more to the administra-

tive, oversight, and inspection

burdens previously specifically

imposed under the FCPA and

generally required by external

auditors. Treasurers have not

ignored bribery risk.

Focusing on bribery risk,

however, is not equivalent to

mitigating it. The conditions

that promote this risk (e.g., inad-

equacy of wages, opacity in the

exercise of decision making) are

as virulent as ever notwithstand-

ing remediated internal control

systems, better trained internal

and external auditors, and high

technology. For better or worse,

there will not soon be a shortage

of headlines screaming breach

of law, policy, and control (e.g.,

GlaxoSmithKline [GSK]).

GSK is accused

of bribing Chinese

hospitals and Pol-

ish doctors to sell its

drugs. The headlines

imply that bribery

was an accepted part

of GSK business,

as these activities in

China and Poland

allegedly implicated

direct involvement

by senior manage-

ment of GSK.

Among the more

serious potential

results is realization

of reputation risk

(i.e., regulators and

customers may shun GSK as a

corrupt enterprise).

Whether the treasury func-

tion was deficient in design and/

or operation at GSK cannot be

determined entirely from the

accusation or even fact of brib-

ery occurring within the domain

of its operations. The structure

of the modern control systems

depends on computer-based

technology to extend, stream-

line, and centralize review and

approval processes with their req-

uisite supporting documentation.

However, to a significant extent

treasurers are alienated from the

local knowledge and understand-

ing within the domain of the

Proper cash management is one of a treasurer’s

key responsibilities. Regulators, such as the U.S.

Department of Justice and the U.K. Serious Fraud

Office, are always watching for evidence of brib-

ery. And treasurers know that regulators’ enforce-

ment actions can bring high costs and threats to

reputation and goodwill. But focusing on bribery

risk is not the same as reducing it, warns the

author of this article. The conditions promoting

this risk—such as low wages and nontransparent

decision making—are as virulent as ever. And that

is true in spite of updated internal controls, better

training, and high-tech tools. Exactly what is the

current situation, and what should treasurers do?

© 2014 Wiley Periodicals, Inc.