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Audits, Compliance & The Commercial Professional

April 5, 2011

Continuing demands for greater transparency in business operations are matched by questions over how to monitor corporate behavior. This raises issues over the extent of regulation, the quality of audit and the extent to which ‘reputation risk’ might cause self-monitoring.

A precise balance will probably never be struck, but the interest in these topics is unparalleled. Last week, while the US trade regulator announced a settlement with Google over privacy protection, the UK House of Lords was reporting on audit competition (or its fears over the lack thereof). Companies today feel obliged to announce their policies in a whole range of areas – data protection, environment, health and safety, corruption are some examples. On one level, they hope to build their reputations through such policies, yet of course they then face incremental blame if they do not meet their own standards. And they can be sure that the media (both established media and the ‘new media’ of bloggers etc) is watching and waiting for them to fail.

As part of our work at IACCM, these fields of compliance and audit have become steadily more important. It is obvious that they are linked to the whole commitment and contracting process. A big question for the contract negotiator or manager is to what extent they should have personal or professional responsibility to ensure that the commitments they make are a) in line with stated corporate policies and b) that the corporate policies against which they are committing are in fact capable of being followed. To that extent, is the contracts or commercial manager also an auditor?

In my opinion, this is not a new question, but it has reached new levels of importance. Personally, I always felt that it was my job to ‘systems assure’ the commitments I was making when I negotiated a contract, and to be open and honest with the customer when I felt that a commitment was at risk. But I think that integrity has increasingly been challenged by modern sales and procurement practices. It feels as if many relationships are built around what the respective organizations can get away with, rather than caring too much about honorable or honest disclosure. In a sense, the behaviors that used to be associated with street traders appear to have permeated even to the Boardroom, with a consequent loss of trust and increased need for regulation and audit.

The contracts and commercial professional sits in the middle of this. Should they have ethical standards, or should they simply ‘play the game’?

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