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ABC of responsible procurement

Continuing on the discussion of responsible procurement (refer my earlier post here), let's start with the ABC of it.

ABC here does not refer to the basics of responsible procurement but rather to the Anti-Bribery and Corruption policy that organizations have under the umbrella of responsible procurement. The ABC policy basically comprises of the following aspects:-
Suppliers neither offer or accept bribes nor permit anyone to do so on their behalf which includes: offering or giving - directly or indirectly - money or anything else of value to any person in order to obtain or retain business for themselves, their organization or customers . A bribe would constitute offering payments, gifts, hospitality, entertainment or anything of value.

For conducting a due diligence for this parameter, generally a two-step approach is followed:

  • A standard questionnaire is sent to suppliers to gather detailed information about the suppliers for assessment on ABC parameters. The due diligence questionnaire primarily seeks information about owners, partners, shareholders, senior management team etc. Besides this, it also asks for information on any linkages with government officials and the suppliers own policies around anti-bribery & corruption practices.
  • Apart from the primary due diligence mentioned above, organisations also conduct secondary due diligence which includes using politically exposed persons (PEP) databases for assessing whether companies and their personnel are connected with governments, state-owned entities (SOE) or those associated with them. This information is important when conducting FCPA(Foreign corrupt practices act) / Anti-bribery due diligence and looking to ascertain whether the particular suppliers or their executives have any links to government officials. Organisations have tie-ups with commercial data providers who help them carry out this activity with ease.

The frequency of rescreening varies from organisation to organisation & their supplier profile. The most common options which are used are: biannually/annually or at contract renewal time.

The frequency of rescreening within the supplier base is dependent upon the following aspects:

  • The geography of the supplier (e.g., high-risk vs. low-risk regions)
  • The findings of the original due diligence (i.e., whether the supplier falls under the high risk category)
  • The type of supplier (e.g., authorised agent vs. reseller)
  • The amount of business (i.e., dollar value) being transacted with the supplier & how critical the supplier is for the organisation

The best in class organizations conduct this due diligence exercise at the vendor selection stage itself as a proactive measure towards compliance to its ABC policy. They also do conduct the rescreening exercise at a pre-defined frequency based on the factors which have been mentioned above. How does ABC fit into your organization's purchasing policies? Let's continue the discussion.

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