TRANSPARENCY INTERNATIONAL NEW ZEALAND

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1 Institute of Directors 15 th August 2018, 7:30am Quality Hotel Plymouth International Taranaki TRANSPARENCY INTERNATIONAL NEW ZEALAND Suzanne Snively, ONZM Chair, Transparency International New Zealand Inc (TINZ)

2 NZ PUBLIC SECTOR IS #1

3 TINZ 13 PILLARS

4 IOD S FOUR PILLARS OF GOVERNANCE BEST PRACTICE

6 CORRUPTION IS THE WORLD S #1 ISSUE Corruption is so common that it is normalised in many countries. A PEW international survey found 76% believed corruption to be one of the world s biggest issue (compared to 53% who thought poor education was).

7 CORRUPTION IS THE WORLD S #1 ISSUE All New Zealand organisations, be they SOEs, NGOs, Sporting Bodies, Business, Financial Services have an opportunity to add to their organisations reputation through association with New Zealand s top ranking as the least corrupt public sector.

CORRUPTION IS THE WORLD S #1 ISSUE Dr Peter Eigen and New Zealander, Jeremy Pope, set up the global organisation, Transparency International (TI Berlin), in 1993.

8 CORRUPTION IS THE WORLD S #1 ISSUE Dr Peter Eigen and New Zealander, Jeremy Pope, set up the global organisation, Transparency International (TI Berlin), in Eigen and Pope were working in Africa and became concerned that large amounts of foreign aid was channelled to corruption officials instead of getting to its intended recipients. Photo on right is Pope, TI s first CEO.

9 CORRUPTION IS THE WORLD S #1 ISSUE Eigen(right) and Pope set up TI to fight corruption, initially funded by international aid organisations. Now, nearly 25 years later, TI Berlin has nearly 100 chapters committed to addressing corruption. NZ stands out to prevent corruption with strong integrity systems.

10 PUBLIC SECTOR INTEGRITY SHAPES BUSINESS BRAND In New Zealand: The State Services Commissioner has set up a new role at the Commission Deputy Commissioner, Integrity, Ethics and Standards. A government agency, The New Zealand Story is working with businesses to demonstrate the potential for increased returns based on the ethical reputation of public officials.

11 PUBLIC SECTOR INTEGRITY SHAPES BUSINESS BRAND

12 BRIBERY, CORRUPTION AND FRAUD Bribery:...is the offering, soliciting, giving or receiving of a financial or other advantage to influence the actions of a person in charge of a public or organisational duty. For an action which is a breach of trust in the business context, this is usually in order to obtain or retain business or to secure an improper advantage. Small bribes to progress actions are facilitation payments illegal here but the law is silent for offshore.

13 BRIBERY, CORRUPTION AND FRAUD Corruption:...is the abuse of entrusted power for private gain. There are many specific forms of corruption.

14 BRIBERY, CORRUPTION AND FRAUD Fraud: is intentional deception made for personal gain or to damage another individual or organisation. Fraud is a generic term used to describe any deliberate activity or deception whereby an employee (or employees) obtains some form of benefit, whether for material or conceptual gain, for themselves or on behalf of others, that they would not otherwise be entitled.

15 BRIBERY, CORRUPTION AND FRAUD Fraud can happen in any organisation (these same pressures can also explain bribery and corruption)

BRIBERY, CORRUPTION AND FRAUD Nations are also exposed to criminals involved in bribery, corruption and fraud from offshore looking for safe havens.

16 BRIBERY, CORRUPTION AND FRAUD Nations are also exposed to criminals involved in bribery, corruption and fraud from offshore looking for safe havens. There is still too much corruption out there, and we want to see much more being done about it. We must address the way the corrupt are getting away with it, unmasking them, drawing attention to corrupt schemes such as the abuse of offshore companies. José Ugaz, RNZ August 2017 José Ugaz Chair of the Board Transparency International,

17 KEY FEATURES OF THE INTEGRITY BASE TO PREVENT FRAUD

18 KEY FEATURES OF THE INTEGRITY BASE TO PREVENT FRAUD INTEGRITY TOOLS TO PREVENT CORRUPTION AND FRAUD 1. TONE AT THE TOP Commitment to the prevention of corruption by policy makers, boards of directors and senior leadership teams reinforces the values that create strong integrity systems and sets an environment for preventing corruption.

19 KEY FEATURES OF THE INTEGRITY BASE TO PREVENT FRAUD INTEGRITY TOOLS TO PREVENT CORRUPTION AND FRAUD 1. TONE AT THE TOP When Directors actively engage with their role in setting the tone at the top, they provide a strong foundation to their organisation s integrity system, the best (and least cost) way of preventing corruption.

20 KEY FEATURES OF THE INTEGRITY BASE TO PREVENT FRAUD INTEGRITY TOOLS TO PREVENT CORRUPTION AND FRAUD 1. TONE AT THE TOP Observance of the Institute of Directors Four Pillars of Best Practice is a great start. A challenge is for this to be more than simply about leadership when all Directors understand the seriousness of the threat of corruption and ensure that their leadership is relevant and empowers all people staff, stakeholders, customers the integrity system will become a more effective preventer.

21 KEY FEATURES OF THE INTEGRITY BASE TO PREVENT FRAUD INTEGRITY TOOLS TO PREVENT CORRUPTION AND FRAUD 2. CODE OF CONDUCT AND GUIDELINES CONTINUOUSLY REFRESHED A vibrant code of conduct that engages Boards, management teams and staff provides the framework for trusted operations, staff and customer relationships, aimed at doing the right thing.

22 KEY FEATURES OF THE INTEGRITY BASE TO PREVENT FRAUD INTEGRITY TOOLS TO PREVENT CORRUPTION AND FRAUD 3. CORRUPTION PREVENTION COMMUNICATION AND TRAINING Maintaining an ethical, transparent model of business contributes positively to risk management and strategy. Regular communication highlighting the benefits of trust, cases of individual courage as well as calling out corrupt practice when it occurs, backed up with training aimed at preventing corruption.

23 KEY FEATURES OF THE INTEGRITY BASE TO PREVENT FRAUD INTEGRITY TOOLS TO PREVENT CORRUPTION AND FRAUD 4. UP-TO-DATE KNOWLEDGE OF RELEVANT LEGISLATION/ REGULATION Consumers are increasingly demanding more ethical products and services. Retail research provides data on consumers purchase decisions based on ethics. International cooperation around anti-money laundering and domestic legislation are changing at a rapid pace making it necessary to have explicit systems to keep up-to-date on anti-bribery and anti-corruption legislation.

24 KEY FEATURES OF THE INTEGRITY BASE TO PREVENT FRAUD INTEGRITY TOOLS TO PREVENT CORRUPTION AND FRAUD 5. AVENUES FOR REPORTING BREACHES IN ETHICAL STANDARDS Whistle blowing provides a strong lever for preventing corruption through enabling staff to report breaches of ethical standards. This works effectively when there are strong protective disclosure processes so that all staff members feel safe in reporting breaches when they have evidence. Staff also expect to see sanctions exercised for fraudulent behaviour and to have on-going support as the consequences related to the event become public.

25 KEY FEATURES OF THE INTEGRITY BASE TO PREVENT FRAUD INTEGRITY TOOLS TO PREVENT CORRUPTION AND FRAUD 6. DUE DILIGENCE OF DISTRIBUTORS, AGENTS, JOINT VENTURES With an increasingly diverse New Zealand population, labour force and overseas markets, organisations that are pro-active in carrying out due diligence of distributors, agents, joint ventures, sub-contractors and other suppliers, are in a stronger position to prevent bribery, corruption and fraud.

26 KEY FEATURES OF THE INTEGRITY BASE TO PREVENT FRAUD INTEGRITY TOOLS TO PREVENT CORRUPTION AND FRAUD 7. REGULAR RISK ASSESSMENTS THAT UNCOVER CORRUPT PRACTICE Undertaking regular risk assessments that uncover corrupt practice, assists directly in preventing corrupt practice while also signalling that addressing bribery, corruption and fraud, is a priority for any organisation. This is also an objective way of discovering if there are instances of corrupt practice.

27 BUSINESS INTEGRITY SYSTEMS NEED IMPROVEMENT Is the New Zealand Private Sector doing as well as the Public Sector at setting the tone at the top? No! Surveys consistently find that the private sector doesn t prioritise practices that prevent bribery corruption and fraud.

28 BUSINESS INTEGRITY SYSTEMS NEED IMPROVEMENT Why isn t business engaged with ensuring that its role setting the tone at the top needs to be effective at preventing corruption? Lack of awareness A key reason for lack of leadership by management and governance in corruption prevention is that they don t believe they are vulnerable.

29 BUSINESS INTEGRITY SYSTEMS NEED IMPROVEMENT YET AS WELL AS PREVENTING CORRUPTION, STRONG INTEGRITY SYSTEMS PROVIDE OPPORTUNITY FOR BUSINESS GROWTH

30 STRONG INTEGRITY SYSTEMS ARE GOOD FOR BUSINESS INTEGRITY SYSTEM DEVELOPMENT FACTORS 1. Reputation and Brand 2. Easier Market Access 3. Lower Costs 4. Customer Loyalty / Market Position 5. Access to Capital 6. Quality Committed Staff 7. Higher Returns

31 STRONG INTEGRITY SYSTEMS ARE GOOD FOR BUSINESS INTEGRITY SYSTEM DEVELOPMENT FACTORS 1. REPUTATION AND BRAND In a globally-internet-connected world, having an authentic reputation is what generates a respected brand. Case studies indicate reputation generates as much as 65% of business returns. Businesses that pick up their game in terms of tone at the top and culture are better placed to gain the advantages from recent trends in responsible investment

32 STRONG INTEGRITY SYSTEMS ARE GOOD FOR BUSINESS INTEGRITY SYSTEM DEVELOPMENT FACTORS 2. EASIER MARKET ACCESS Maintaining an ethical standard of business and adhering to New Zealand s good reputation opens doors for companies to access new markets. King Ora Salmon and AsureQuality have demonstrated how New Zealand s reputation has allowed companies to access new international markets.

33 STRONG INTEGRITY SYSTEMS ARE GOOD FOR BUSINESS INTEGRITY SYSTEM DEVELOPMENT FACTORS 3. LOWER COSTS Maintaining an ethical, transparent model of business contributes positively so organisations remain sustainable, and, prevent scandal and catastrophe. Observing the costs of recent cases of corporate scandal and fraud, FIFA and Volkswagen, indicates the scale of the benefits from ethical behaviour shaping risk-management and good strategy.

34 STRONG INTEGRITY SYSTEMS ARE GOOD FOR BUSINESS INTEGRITY SYSTEM DEVELOPMENT FACTORS 4. CUSTOMER LOYALTY / MARKET POSITION Companies that can consistently and transparently show customers that they are ethical can maintain and grow their revenue. L Oréal is an example of a strong, ethical company that has generates a loyal and steadily increasing customer base, targeted to double the number from 1 billion to 2 billion customers by 2020.

35 STRONG INTEGRITY SYSTEMS ARE GOOD FOR BUSINESS INTEGRITY SYSTEM DEVELOPMENT FACTORS 5. ACCESS TO CAPITAL Firms able to show that they have integrity are more likely to access capital on good terms. Investors will be more likely to invest in a company with solid, ethical risk management, and accessing loans will be easier for those with credible, ethical reputations. Companies positioned around a reputation for strong integrity will attract responsible investors.

36 STRONG INTEGRITY SYSTEMS ARE GOOD FOR BUSINESS INTEGRITY SYSTEM DEVELOPMENT FACTORS 6. QUALITY COMMITTED STAFF Maintaining a positive and ethical work environment will ensure more efficient and productive staff. Avoiding favouritism and nepotism allows talented employees to feel certain they can develop careers based on fair compensation. Quality staff prefer to work for ethical businesses with supportive cultures led by the tone at the top.

37 STRONG INTEGRITY SYSTEMS ARE GOOD FOR BUSINESS INTEGRITY SYSTEM DEVELOPMENT FACTORS 7. HIGHER RETURNS Ethisphere s World s Most Ethical (WME) Companies list of companies continuously honoured over the last decade as WMEs, have experienced high returns on investment that the Standard and Poor s average for the top 500 listed US companies. This provides evidence that adherence to ethical and sustainable behaviour leads to increased returns on investment.

38 GROW ECONOMY AND TAX BASE, INCREASE PROSPERITY Businesses who maximise the above 7 Integrity System development factors will attract increased capital. The quality of the capital will enable businesses to expand their activities, improving returns for their business by better meeting the expectations of their customers and growing their customer base. With greater business earnings, the New Zealand tax base will grow, providing resources to invest in our people through education and health.

39 GROW ECONOMY AND TAX BASE, INCREASE PROSPERITY Those of you in governance positions can lead in adopting the integrity tools that prevent corruption. With them in place, there is much to gain by setting a strategic direction that maximises the benefits from the 7 Integrity System development factors. Everybody can win this way integrity is infinite.

International comparisons find that New Zealand has strong transparency led by the Government and an

It s time for Directors to step up to the same standard, providing strong integrity systems so that New

40 International comparisons find that New Zealand has strong transparency led by the Government and an effective public sector. It s time for Directors to step up to the same standard, providing strong integrity systems so that New Zealand organisations can become more productive and begin to move our future economy into a permanent positive spiral! Thank You DISCLAIMER Transparency International (New Zealand) Inc cannot accept any liability whatsoever for the consequences from the use of this presentation by any party in any circumstances. Comment, including reference to others knowledge, is actively sought and will be considered in future discussion.

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