Reducing Third-Party Company Risks in Emerging Markets


As the world’s multinational companies seek profits in new, high-risk markets, they inevitably start depending on local businesses – third parties – to operate. Such partnerships bring with them both the promise of mutual growth and, for the multinational, responsibility for the behavior of its new local partner. That’s because aggressively applied laws such as the U.S. Foreign Corrupt Practices Act (FCPA) hold the multinationals responsible for third parties’ behavior.

Of the estimated 106 companies currently under investigation for FCPA-related violations, a significant number of them are related to suspected third party wrongdoing – assuming that past settlements made public are a reliable guide. So, how to reduce the corruption risks presented by doing business with third parties in developing countries where bribery is an accepted practice? CIPE is working on finding answers. So, too, is one of the world’s leading risk management firms,  SAI Global, which recently presented a webinar and offered a few tips on how to construct an anti-corruption training program for third parties.   

  1. Figure out the audience: Who must be trained within the third-party company and how will they be engaged? With answers to these questions, move forward with designing a training program.
  2. Practical approach to training: when training third-party companies, it is important to take into account the appropriate content. Make sure that the compliance training program’s content is the same for the multinational’s direct employees as for third parties so that the message is consistent.
  3. Getting started: begin implementing trainings with the highest-risk third parties. To mitigate risks with highly risky companies, incorporate compliance training as part of the contract with third parties.

SAI Global’s guidance for the most part parallels the approach that CIPE has pioneered in Russia to help mid-sized firms put compliance programs in place so as to make them more attractive partners for multinationals. CIPE’s effort in Russia is guided by a Compliance Advance Board, composed of compliance officers from 13 European, Russian, and U.S. firms. One of the Board’s most active members is Ilsur Akhmetshin, Russia Integrity Officer for the Swiss engineering behemoth ABB (a multinational engineering company) who firmly believes in the importance of compliance training for third-party vendors.

“I strongly recommend as an initial training for third party company staff to take the UN Global Compact/UN Office on Drugs and Crime’s online course “The Fight Against Corruption” offered in 10 languages.  It uses six interactive learning modules to further the audience’s understanding of the UN Global Compact’s 10th principle against corruption and the UN Convention against Corruption as it applies to the private sector,” said Akhmetshin, who taught a module during CIPE’s three-day anti-corruption training program in May in Moscow.

“In-person training for local third party companies in emerging markets should focus on extraterritorial liability according to the FCPA and the UK Bribery Act. Often, local companies refuse to give any thought to these acts because their firms are not US or UK entities, and they assume they are not liable under these laws. Compliance trainings must dismantle this misconception,” said Akhmetshin, who, as ABB’s chief compliance officer in Russia is responsible for over 2,500 vendors.

Compliance training should also include recommendations on implementing specific local requirements. For example, Russia’s Article 13.3. of the Federal Law on Countering Corruption #273-FZ, as amended on 3 December 2012,  obliged all companies, SOEs and private, giants  as Gazprom and SMEs,  to take anti-corruption compliance measures. Such new laws should be emphasized in the trainings.

When compliance training does not take place, a third-party company can bring trouble for its improper actions not only on itself, but also to its business partners. Always remember that if a multinational company can be liable for the third party company’s illegal actions.

What approaches is your company taking to reduce third-party vendor risks? What are your thoughts about reducing risks especially in emerging markets like Russia? CIPE is always looking to hear about different ways that companies are reducing value-chain risks.

Maiko Nakagaki is a Program Officer for Global Programs at CIPE.