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Doing Business Abroad: What's Next?
As we have highlighted in Part 1 and Part 2 of Doing Business Abroad, a company's Directors and Officers can be exposed to a large number of risks overseas. One particular area that can often be overlooked is developing and implementing solid policies and procedures for protection from the Foreign Corrupt Practices Act as well as the UK Bribery Act. Directors & Officers Liability policy does provide some mitigation for this risk, however, the cost for violating these laws could cause irreparable harm to your company including paying fines well in excess of coverage that is available in the market place.
Not only will this become a financial risk for your organization, but it will also hurt your company's reputation which could lead to its inability to recover due to damaged relationship with customers.
Most recently, three high profiled companies such as Hewlett Packard, Alcoa World Alumina, and Total S.A. were charged with violating the FCPA. Each of these companies was assessed with fines of $108M, $209M, and $245M respectively; for a total of $562M in fines!!! With fines this high the question becomes; can your company afford to incur these fines and what policies do you need to implement into your organization?
It is our opinion that in order for a company to remain compliant with both the FCPA and UK Bribery Act the tone must be set from the top down. In reviewing our clients’ risks, we undertake an iterative risk review process, that will look at what (if any) policies and procedures our clients have in place to identify and where they are deficient as it relates to compliance with the FCPA and UK Bribery Act. This is something every organization must consider due to the impact it could have on them and reinforces why a company must seriously consider all of the risks of doing business abroad. This includes more than just buying insurance and requires immediate attention from an organization's leadership. Unfortunately, many companies today are not aware of all of their risks.
If your organization is doing business abroad and you would like to discuss this issue further or need help structuring your D&O program, please feel free to contact us.
About The ALS Group
Albert L. Sica is the Founder and Managing Principal of The ALS Group, an independent insurance and risk management consulting firm focused on helping their clients reduce insurance and risk related costs. E-mail Al at asica@thealsgroup.com, or call (732)395-4251 for more information.