Unethical business practices can have far-reaching consequences. GlaxoSmithKline (GSK) learned that the hard way over the past year, as a series of bribery scandals rocked the corporation and led to criminal charges in China for some of its principal officials. Recent financial news announced by GSK shows that the troubles have taken a heavy toll on the company’s earnings: Profits have been slashed nearly in half compared to the previous year.
While GSK is a high-profile case, such fallout is not uncommon for companies that become embroiled in bribery or corruption scandals. Damage to reputation is one of the most difficult hurdles for any corporation to overcome. Added to mounting legal costs and fines, the loss of business and consumer confidence can spell disaster for a company. That is why business leaders must be vigilant and proactive in creating a zero-tolerance environment toward unethical behavior at their company.
That goes further than keeping business clean within your own offices. An unfortunate fact is that third-party partners and outside vendors who engage in unethical business practices can have the same negative affect on a corporation as if the acts had originated among its own employees. That’s because customers, investors and the public expect companies to be diligent in vetting their own suppliers and business partners as if they were their own.
The Horse Meat Scandal
The infamous horse meat scandal in the UK was a classic scenario of the damage that can come from risky third-party associations. Widely known international corporations, including Burger King and others, were forced to cut ties with a meat supplier after facing financial and reputational harm from the news that some of the supplier’s products were tainted with horse flesh.
The revelations of tainted meat resulted in international news headlines, waves of criticism from consumers and food products being pulled from shelves and freezers in response to the uproar.
Lessons for Businesses
CRI Group’s Integrity Due Diligence Investigations have exposed security issues that could have potentially had a disastrous impact on our clients’ business operations had they not been identified. Some of the risks companies face include:
· Merging with an international business embroiled in several behind-the-scenes legal battles
· Making procurement decisions involving the inappropriate influence of government officials who were slated to receive kickbacks
· Partnering with organizations that are potential credit risks, have claimed bankruptcy, have dissolved stated companies or are faced with debtor filings
· Awarding work to an overseas contractor with absolutely no prior experience
· Affiliating with a contracting company owned by a politician with significant influence on future awards
CRI Group’s experts help business leaders develop and put in a place effective third-party risk assessment plans that keep organizations protected, and minimizes exposure to unseen or unknown trouble spots. As the GSK case and Europe’s horse meat scandal both show, the effects of not being prepared and protected can be disastrous.