Survey Spotlights Ethics Among Oil and Gas Firms
A Team Effort
Thomas also pointed out that a virtually all compliance and regulatory regimes demand “adequate” due diligence, adding that what one company considers adequate may be overkill for another – and vice versa.
“However, establishing a foundational level of due diligence – in which all third parties are subject to the same broad spectrum of due diligence – can help to form a strong defense should anything bad occur,” Thomas continued. “This should, of course, be combined with a rigorous approach to keeping ‘books and records’ to show what was known, when, how decisions were reached, etc.”
Employee engagement that spans the organization is crucial for implementing a due diligence and compliance program, said Thomas.
“A top-down approach is necessary, where the highest echelons of management must be seen to, and indeed to actually be, buying into the process of compliance,” he explained. “Without that, it will be near impossible to ensure that every employee is aware of their responsibilities. In an industry with a very large spread of the types and locations of workers, such as the oil and gas sector, getting a local manager in West Africa to see the importance of due diligence and compliance in the same light as a C-suite executive in an air-conditioned high-rise is a vital, but tricky, balancing act.”
Cautioning that carrying out due diligence is more than a “compliance-led box-checking exercise" and is not a matter of “simply looking for bad guys,” Thomas pointed out that it helps a business to better understand and better interact with third parties: business partners, clients, customers and others. He added that it helps a firm to better identify risk areas and highlight supply chain strengths.
“A company with a strong due diligence program is able to say that they have taken strong steps to ensure that bribery, corruption, slavery and trafficking are in no way part of their business,” Thomas said. “In an age where the oil and gas sector is under increasing consumer scrutiny and pressure, a strong due diligence program can weed out the sorts of business partners a company really shouldn’t be dealing with.”
Part of the challenge of implementing due diligence is overcoming the perception that it is a barrier to doing business, but that need not be the case, said Thomas. He pointed out that a due diligence program done properly can increase business transparency, strengthen supplier relationships and potentially drive cost efficiencies in a supply chain.
“Yes, there will be some cost implications, but those can be shown to have real benefits for a business,” noted Thomas. “Conducting due diligence at an early stage of onboarding a new business partner can save significant time and money by avoiding entering into any ‘bad’ business relationships.”
Thomas added that extending the due diligence process to include ongoing changes in a partner’s status – such as monitoring government connections or adverse media reports – can also preemptively identify potentially problematic issues.
“For example, a trusted business partner might be trusted today, but what if they were to become involved in the use of slave labor or paying bribes on behalf of a peer/competitor that they also work with?” he said. “Knowledge of such incidents before any impact on your business could be critical. As Ronald Reagan put it so succinctly, ‘Trust, but verify.’ Just because you have worked with someone for years doesn’t mean you shouldn’t be checking in on them from time to time.”
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