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Almost every company is part of a supply chain, which necessitates some level of due diligence to reduce the risk that one or more of their suppliers may pose a security, financial, or other threat to their operations, stakeholders, or reputation.
Last week, Drexel University's Kline School of Law hosted an event called "Supply Strain: Managing Global Compliance Through Your Supply Chain" to discuss today's supply chain challenges with compliance, risk, and legal professionals (as well as Drexel students).
With the ever-expanding sanctions landscape surrounding the Russia-Ukraine conflict, supply chain strain and enforcement risk are skyrocketing. The US government, as well as other international organizations, are committed to strict adherence.
Speakers like Michael Reilly, general counsel at FMC Corp., and Zane David Memeger, partner at Morgan Lewis, outlined the risk landscape and reminded attendees to evaluate supply chains and trade operations on a regular basis to ensure companies are meeting compliance expectations. They said it is critical to incorporate know your customer (KYC) practices to understand customers' ownership structures and supply chains, as well as ensuring that all goods are scrutinized throughout the product and service life cycle.
Sanctions compliance, according to Roberto Gonzalez, a partner at Paul Weiss, entails evolving risk assessments, consistent auditing and testing, sanctions screening software on filter flaws, information sharing with government agencies, training, and a commitment from management to spend the time and resources necessary to get sanctions risk under control.
Assistant US Attorney Michelle Morgan, chief of the Corruption and Civil Rights Section at the US Attorney's Office for the Eastern District of Pennsylvania; Cuneyt Akay, shareholder at Greenberg Traurig; Carrie Watt, a compliance executive and attorney at Avantor; and Emilia McKee Vassallo, partner-elect at Ballard Spahr, all spoke about the risk of financial crime.
According to them, the risk of such crime affecting a company's supply chain is being exacerbated by companies' growing reliance on their supply chains as a result of ongoing shortages caused by the Covid-19 pandemic, significant inflation, and the impact of the Russian-Ukraine conflict.
Bribery and fraud are two common forms of business corruption. Kickbacks are one type of bribery that can be used to ensure that a supplier receives a contract. Some vendors, as well as certain jurisdictions, take it more seriously than others, as kickbacks are tolerated in some parts of the world, including among government officials.
Human rights and worker safety issues, such as forced labor charges and human trafficking, can arise as a result of supply chain corruption. Nobody wants to think those conditions exist in today's global society, let alone have them associated with their business.
Laura Siegel Rabinowitz, shareholder at Greenberg Traurig, and Jill Steinberg, partner at Ballard Spahr, spoke on another panel about how businesses must keep track of the growing number of laws in this area, such as the California Transparency in Supply Chains Act and the United Kingdom Modern Slavery Act, and include zero-tolerance policies for human trafficking in supplier selection procedures.
According to them, these policies must apply to company operations as well as the supply chain, which includes business partners. Brendan Collins, a partner at Ballard Spahr, urged attendees to take advantage of supply chain management technology and to remember what compliance really means: doing what you say you are going to do.
Regular certifications and as many ground-level audits as possible are expected, as are training programs to educate relevant representatives on human trafficking. (However, in some areas, this will be difficult.)
Susan Frank Divers, a senior adviser on ethics at LRN, spoke about ethical cultures at businesses in conversation with Catherine Muldoon, general counsel at Baldor Specialty Foods, to tie together the themes discussed at the event.
According to a study conducted by LRN, 79 percent of respondents said the pandemic strengthened their company or organization's ethical culture, which LRN described as the ultimate "stress test." Furthermore, 87 percent of respondents said their leaders rose to the occasion when faced with the challenges posed by Covid-19.
By fLEXI tEAM