A code of conduct for Caesar’s wife

“Follow the money” is as good a rule as any for an assessment of compliance risk, and this is surely true for conflicts of interest.   In many companies that trail leads to procurement – and often to the understanding that those involved in buying goods and services for a company on a day-to-day basis must be above any suspicion.

Increasingly (at least from what I can see) procurement activity is being centralized in enterprise-wide procurement functions.  Much of the impetus for this has nothing to do with conflicts of interest – but, rather, arises from a need to bring more professionalism to procurement and to get the benefit of buying in large quantities, among other things. However, centralization is also a plus from a COI prevention perspective, as it is easier to monitor and otherwise mitigate COI risks in a small group than in the much larger general employee population.

Such C&E measures sometimes include having a specific (and typically very short) code of conduct for the procurement department (in addition to the general code). Among the types of COI issues that could be covered are those relating to gifts, entertainment, travel and donations – meaning these codes can have more restrictive rules about such activities  for procurement staff than for the rest of the employee population. Other types of COIs are typically addressed in these codes as well (e.g., having an ownership interest in or receiving other income from a supplier).

Of course, procurement codes should cover issues beyond  those in the COI area. Confidential information (meaning that of suppliers) is one such topic.  Another is antitrust, with a focus on the oft-neglected buy side.

Reviewing such a code should be part of the on-boarding process for new procurement employees.  As well, periodic training on its key provisions should be provided.  And, one should consider certifications by procurement employees too.

I should emphasize that not every company needs a code like this. However, in my view there are many companies that don’t but should consider developing one.

Finally, there is more to a “Caesar’s wife” approach to compliance for procurement than a code, training and certification. Companies should also be alert to “point-of-risk” compliance opportunities (a concept explored in a recent post). For instance, when a procurement department member  leaves a company to go work for a supplier and has knowledge of pricing and other sensitive information of other suppliers (meaning her new employer’s competitors) the exiting process should include  a reminder of the continuing obligation to keep information of this sort confidential.  And, somewhat more drastically, for higher risk business lines or geographies, rotating procurement assignments may be what it takes to be truly above suspicion.

 

One Comment
  1. Penny Milner-Smyth 2 years ago

    As an in-house Human Resources practitioner and ethics advisor I could not agree more with the specific actions proposed for procurement officials. Certainly, a centralised procurement function means that I sleep better at night, knowing that this model offers superior controls to those we were able to achieve in a decentralised procurement context. What I am currently feeling the lack of is a code for “requestors” and “approvers” at the operational level who mandate the procurement officers to proceed with a purchase – as the remaining risk is now at that level of employee who will always retain some influence when it comes to operationally and geographically specific supplier selection in the centralised model. For the 2016 to-do list!

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