A problem of national security: corruption and derived risks

The subject of this editorial, together with the publishing of the study released by Ernst & Young included in this current issue – ‘Managing bribery and corruption risks in the oil and gas industry’, is not accidental. The US Vice-President Joe Biden, during his visit in our country, stressed in his speech, among others, an important aspect: the connection between corruption and national security. Besides assessing the support for Romania for ensuring energy independence, the American official insisted on a matter of interest for the US, specifically the sanitization, the removing of corruption from a buffer zone so that it becomes a feature specific only to areas contorted by conflicts.

The discussion about corruption in Romania is not a new one. According to a Ernst & Young report issued in 2013, the phenomenon is continuously expanding in Europe from North to South, our country being placed somewhere in the middle of the standings, while northern countries have the lowest percentage. Risks related to fraud, bribery and corruption deeds are mentioned by the company, which is drawing attention on the fact that some 15 percent of the financial managers included in the study said they would be willing to offer payments in order to get hold of a deal, while 4 percent said they would be willing to forge the reports on their company’s financial performances.

As far as Romania is concerned, the study reveals that, in spite of the risks deriving from inadequate behaviour and corrupt practice, a smaller number of executive directors than the rest of the world say there is internal communication within the company on issues such as anti-fraud and anti-bribery. In other words, this issue could be translated into the fact that such illegal practices, although known, are not always discussed or sanctioned within the companies. Hence, only 10 percent of the Romanian participants have reported that the infringing of the anti-bribery and anti-corruption policies was punished, while the proportion reaches 45 percent on world scale.

One of the risks the companies looking for opportunities on emergent markets are facing is that the screening of potential partners is missing. The regulating organisms enforce a diagnosis analysis on third-parties – this is foreseen by the American law (US Foreign and Corrupt Practices Act) as well as by the British law (UK Bribery Act) – yet almost half of the respondents (44 percent) have reported that no check-ups were carried out on the business partners’ history. Many organizations were exposed to supplementary risks by not carrying an anti-corruption diagnosis analysis before and after the acquisitions. For companies with residence in the US, some 84 percent of the respondents are mentioning the fact that they carry out this analysis every time or frequently before the acquisition. In Romania the proportion reaches only 39 percent.

The oil and gas field is subject to several case studies on corruption, according to Ernst & Young analysts, not because the persons or companies active in the field are more corrupt and more liable to receive bribe, but because there are some specific characteristics that lead to increased risks. Therefore the companies should be aware regarding such factors and adopt consequent decisions in order to successfully manage risks related to fraud and corruption. Fortunately, it is high time for the authorized institutions in Romania to do their duties to prevent and fight such phenomena.

“Corruption within the oil field could be substantially reduced if companies were to submit more detailed and transparent reports on their transactions and activities, if they were subject to financial check-ups – to be also published – from independent auditors and were to publish information regarding their branches and their area of activity, making thus possible their efficient monitoring,” the Integrity Centre for Business opines.

The US Vice-President had also mentioned that the US is ready to also grant support for modernizing the domestic infrastructure, so that Romania could become the key-point in connecting the energy markets from the Black Sea up to Central and Western Europe. One question still remains, i.e. if the Black Sea, with its huge energy resources potential, will become a linking bridge or a separation element between two worlds…

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