Compliance in state-owned enterprises

AutorMichael Freitas Mohallem, Beto Vasconcelos and Guilherme France
Ocupação do AutorProfessor at FGV Rio Law School/Professor at FGV Rio Law School/Researcher at FGV Rio Law School
Páginas19-27
Integrity and Transparency in Brazil’s State-Owned Enterprises 19
COMPLIANCE IN STATE-OWNED
ENTERPRISES
48 TRANSPARENCY INTERNATIONAL. Anti-corruption Glossary: Compliance. Available at: .
Accessed on: September 23, 2017.
49 RIBEIRO, M. C. P.; DINIZ, P. D. F. Compliance e lei anticorrupção nas empresas. Revista de Informação Legislativa, v. 52, n. 205, 2015, p. 88.
50 One of the main drivers of the risk-based approach is the Financial Action Task Force on Money Laundering, which employs it to combat money laundering
and terrorist financing. For more details, cf. FATF (also known as GAFI). The FATF Recommendations: International Standards on Combating Money
Laundering and the Financing of Terrorism and Proliferation. Paris, 2012. Available at: . Accessed on: September 10, 2017.
Transparency International defines compliance
as the procedures, systems or departments within
public agencies or private companies that ensure
all legal, operational and financial activities are
in conformity with current laws, rules, norms,
regulations, standards and public expectations and
states that corporations must be held responsible
for actions of their employees, agents, foreign
subsidiaries and for lack of adequate supervision
of compliance programs48.
Thus, it is possible to see that compliance
goes far beyond simply complying with formal and
informal rules. Its objective is to guide the entire
behaviour of an institution, as well as that of its
employees
49
. It applies to all types of organisations,
including, of course, SOEs. One could argue that
market expectations concerning good conduct
from SOEs, one that seeks sustainable profits for
social, environmental and economic development,
are even higher.
At the international level – and many SOEs
operate across Brazilian borders, as noted –
compliance becomes even more essential for
detecting and preventing violations of anti-
corruption rules. For one, the greater distance
from control centres, be they internal or external,
represents a significant challenge for companies.
Furthermore, the existence of multiple applicable
laws and regulations makes it difficult for the
agents themselves and the company to understand
what behaviour is, or is not, expected of them.
In short, compliance efforts aim to mitigate
the risks – legal, regulatory and reputational – to
which the institution and its employees are subject.
SPECIFIC RISKS
An effective integrity program, tailored to
the specific characteristics of SOEs and their
business models, necessarily involves a risk-
based approach50.
Said risk-based approach differs from the
norm-based approach, which aims to apply the
same standards to all circumstances. A risk-based
approach allows liable actors to identify sensitive
points that require the most attention and to act in
a preventive manner. At the same time, applying
the rules in proportion to existing risks allows an
institution to avoid implementing unnecessary
measures and procedures that are merely formal
and are not truly relevant. Implementing complex
control mechanisms for low-risk circumstances
is costly and inefficient.
Effective policies and procedures require a
thorough understanding of the company’s business
model, including its products and services, third
parties, customers, government interactions, and

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