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Corruption Risk Management (CRM)
Risk document January 2019 ALL RIGHTS RESERVED
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Table of contents Contents Pages 1 Organisation context
Strategic Objectives and Key Processes Potential corruption risks 2 Risk Map 3 Summary of Risks 4 Summary of Action Plans 5 Risk Registers ALL RIGHTS RESERVED
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Organisation Context: Strategic Objectives and Key Processes
RiskDoc-01 Strategic Objectives Increase public usage by 20% p.a. Plan, design and implement the development strategy with local government of a high technology park Enhance efficiency by implementing ICT (technology)-based processes Product innovation Develop new designs (2 new designs per year) through research and development projects Create an efficient and dynamic working environment with integrity and good governance Key Processes linked to strategic goals Project management (construction, procurement) ICT management R & D process Human resource management Financial management Potential Corruption Risks (linked to key processes) Abuse of power in tendering - Loose contract to favour an interested sub-contractor Specification of ICT equipment was intentionally catered for interest party Leakage of R&D information to competitors Misuse of discretion and authorization for offices in foreign countries Management over-write for payment of incomplete work Collusion among site managers and checkers to certify non-compliance structure Collusion with suppliers to supply low quality parts Bribery to government officials to register the patents/ trademarks Hiring of “own” people to smooth the tendering and awarding of contracts False claims Bribery to government officials for approval of unsafe building designs Use of middleman Waiver of job rotation for key positions Illustrative example ALL RIGHTS RESERVED
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Risk Map - Corruption risks
RiskDoc-02 Kementerian Pertahanan RISK MAP – 31 March 2019 No. Corruption risks 1 Leak of tender specification to cater for favouring party 2 Loose legal and contractual terms to allow for significant variance orders 3 Political interference 4 Price fixing 5 Bid rigging 6 Use of middleman 7 Collusion with site manager 8 Bribery to government officials 9 False claims 10 Management over-write for payment of incomplete work 11 Collusion with suppliers 12 Waiver of job rotation for key positions Almost certain Likely Moderate Unlikely Rare Insignificant Minor Major Catastrophic 1 12 2 11 8 3 6 7 5 10 9 4 Key: Low Moderate Significant High ALL RIGHTS RESERVED
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Control Effectiveness
Summary of Risks RiskDoc-03 Corruption risks Impact Likelihood Inherent risk rating Control Effectiveness Residual risk rating Risk Treatment? Complex contractual structure Major Moderate High Some weakness Signifcant Reduce Leak of tender specification to cater for favouring party Likely Weak Abuse of power in tendering Political interference Catastrophic Price fixing Satisfactory Unlikely Accept Bid rigging Use of middleman Significant Collusion with site manager Bribery to government officials False claims ALL RIGHTS RESERVED
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Summary of risk action plan
RiskDoc-04 Risk action plans Responsibilities Target Date for detailed risk action plans 1 To consider legal actions to enforce terms in the integrity pact (recovering costs and termination of contract). Legal Dept Procurement Finance 30 September 2017 2 To conduct detailed background checks on joint ventures and agents 3 To develop policies over the prohibition of using agent or middleman 4 To consider an Anti-corruption Policy in the company 5 To implement Integrity Pledge by all staff ALL RIGHTS RESERVED
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RISK REGISTER ALL RIGHTS RESERVED
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RISK REGISTER Risk ID Risks Pages MOD-001
Use of middle man to bribe public officials MOD-002 Abuse of power in tendering ALL RIGHTS RESERVED
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Risk Register (Steps 1, 2, 3) RiskDoc-05 Risk ID 001 Risk title:
Use of middle man to bribe public official State: India Corrupt practices Payments authorised for agents to engage sub-contractors in India Department Project Management Risk Category Operational Causes Consequences Incompetent staff to manage India operations, thus forced to use middleman. Local culture of facilitation payments to get process moving Payment of cash to be favoured for business Political interference Financial loss due to misappropriate or illegal use of funds - a total of $15 mil paid to agent and undisclosed amount paid to polticians Reputation damage - International breach of law and regulation which may lead to reputational shame and debarment (loss opportunity $250 Mil) Impact Likelihood Inherent risk rating Major Likely High 1. Identify Corruption risk 2. Analyse root causes Example only 3. Analyse consequences and determine Inherent risk rating ALL RIGHTS RESERVED 9
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Additional Controls/ Action Plans Control Effectiveness
Risk Register (Steps 4, 5, 6, 7) RiskDoc-05 Existing Controls Additional Controls/ Action Plans Internal audit over anti-corruption controls (1, 2, 3, 4) Whistle blowing hotline (2, 3, 4) To conduct detailed background checks on joint ventures and agents (2, 3) To develop policies over the prohibition of using agent or middleman (2, 3, 4) Control Effectiveness Impact Likelihood Some weakness Residual rating Moderate Significant 4. Identify controls 5. Evaluate control effectiveness: Satisfactory Some weakness Weak Example only 6. Residual risk rating Risk Treatment Option : Terminate Reduce Risk Accept 7. Risk treatment options ALL RIGHTS RESERVED 10
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Example – Risk action plan
RiskDoc-05 RISK Use of middle man to bribe public official RISK ID: 001 Risk analysis Controllable On-going Interconnect to other risks? Uncontrollable Discrete Litigation Poor quality Combination Risk Treatment Strategy: Risk Category: Operational Terminate Reduce Risk Accept Risk Owner: Project management Assessment date: 31 March 2017 Next assessment date: Impact: Moderate Likelihood: Risk Rating: Significant Target Impact: Target Likelihood: Unlikely Target Risk Rating: High level action plan to be considered Responsibility Target date for detailed plan 1. To conduct detailed background checks on joint ventures and agents (2, 3) Legal CEO Office 31 October 2017 2. To develop policies over the prohibition of using agent or middleman (2, 3, 4) 3. ALL RIGHTS RESERVED
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Risk #2: Abuse of power in tendering
Risk ID MOF-002 Risk title: Abuse of power in tendering State: Corrupt practices Department Risk Category Causes Consequences Internal control weaknesses: Delegation of authority not clear Lack of monitoring by IA Conflict of interest – no policy Weak HR management – job rotation Low salary Collusion with suppliers, employees Internal control weakness – taking advantage Culture of accepting corruption – personal gain Financial pressure of the staff Financial loss Reputation loss Litigation Quality and safety compromised Low staff morale Impact Likelihood Inherent risk rating Major Likely HIGH ALL RIGHTS RESERVED
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Risk #2: Abuse of power in tendering
Risk ID: MOF_002 : Abuse of power in tendering Existing Controls Additional Controls/ Action Plans Delegation of Authority – policy Procurement committee and policy SOP – delegation of authority; procurement; conflict of interest Policy – job rotation; recruitment Training and communication to staff Segregation of duties in key controls areas Integrity pact – contractors and suppliers Declaration of assets – all staff To consider an Anti-corruption Policy in the company Integrity pledge by all staff Control Effectiveness Impact Likelihood Some weakness Residual rating Major Unlikely Significant Risk Treatment Option : Terminate Reduce Risk Accept ALL RIGHTS RESERVED
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Risk action plan RISK RISK ID: MOF-002 Abuse of power in tendering
Risk analysis Controllable On-going Interconnect to other risks? Uncontrollable Discrete Combination Risk Treatment Strategy: Risk Category: Terminate Reduce Risk Accept Risk Owner: Assessment date: Next assessment date: Impact: Major Likelihood: Unlikely Risk Rating: SIGNIFICANT Target Impact: MODERATE Target Likelihood: UNLIKELY Target Risk Rating: High level action plan to be considered Responsibility Target date for detailed plan 1. To consider an Anti-corruption Policy in the company 2. Integrity pledge by all staff 3. 4. 5. ALL RIGHTS RESERVED
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End of Document ALL RIGHTS RESERVED
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