Risk Management and Compliance: Guidelines to Effective Joint Ventures

by Lisa Moore

Even during the best of times, compliance can be a complicated issue to handle for many organizations. When faced with the challenge of coping with poor economic conditions and declining markets, many companies begin to seek out joint venture opportunities internationally, due to their cost effective and timely ability to help broaden the company’s reach in to new markets. However, beyond the more obvious risk management challenges that come with these undertakings, which are often made with companies that generally represent the competition, an entirely new set of compliance challenges arises.

Outside the complicated risks of sharing sensitive corporate information and resources with these new allies, there is now the trouble of having to comply with Foreign Corrupt Practices Act (FCPA) regulations.

All too often, whether out of a desperate survival instinct or simple ignorance, many companies are willing to overlook the questionable legal shortcomings of their prospective partners, in the face of a highly profitable business arrangement. What these companies seem not to realize is the extreme danger they are placing themselves in by ignoring the legal infractions of the partner company.

What these companies fail to understand is that, by entering into a joint venture with an organization with less than reputable dealings, they are, in fact, making themselves vulnerable against any number of corporate governance failures and legal ramifications that may arise against the venture partner. In order to avoid such potentially catastrophic circumstances, here are a few guidelines that should always be met before entering into any joint venture.

First, before considering entering into any joint venture, make sure that you take the time to conduct thorough research into the history and dealings of the potential partner in question. Much like running a criminal background check on an individual before you employ them, doing this for a company that you are about to enter into such a delicate arrangement with is far more important.

Never consider entering in to such a venture with any company that appears to be less than reliable, however impressive the potential gains may be. This goes for any subcontractors, consultants and third party agencies under the employ of the venture partner as well.

Second, carefully review the findings of your background search with consideration for the rules and regulations set by the FCPA to ensure that any company you are thinking of entering into a joint venture with is well within the law in their dealings. Also, given the sensitivity of this issue, and in the vein of ensuring that the job is carried out effectively, the reviewers charged with combing through and evaluating this information should not be the direct employees of those responsible for executing the venture.

Also, assert time and again, from the very beginning, before any agreements are made or contracts entered into, that no funds are or will be passed along to any third party foreign governmental officials or political parties as a means of attaining favors and/or uncouth business advantages. This is bribery, short and simple, and a compliance nightmare.

Finally, when drawing up the agreement for any joint venture, there are a few specific rights you should ensure are included in order to help monitor and protect yourself from any future trouble. To begin with, make sure your arrangement provides you the right to audit and coordinate any agreements or third-party contracts that may have any degree of bearing on your venture. Also, ensure that all documents and contracts related to this venture ensures your company the express right to immediately terminate the agreement in the face of any compliance or risk-related complications that may arise.

Source: corporatecomplianceinsights

0 Comments

Leave a reply

Your email address will not be published. Required fields are marked *

*

CONTACT US

We're not around right now. But you can send us an email and we'll get back to you, asap.

Sending

©2018 reputationalcompliance.com

Log in with your credentials

Forgot your details?