Third-party risk management - EY

1 Third-party risk management EY Integrity Diligence A challenging landscape Understanding who you conduct business Some key points regarding third parties include: Proper diligence and monitoring not only with has become more than just good business help reduce the risk of corruption but also Understand the qualifications and associations practice; it is increasingly smart compliance. can cut down on fraudulent transactions, of the Third-party partner, including its Multinational organizations are rapidly embezzlement, conflicts of interest, business reputation and its relationship, if adjusting to enforcement standards that hold related- party transactions and money any, with government officials. The degree companies responsible for the actions of their laundering. They help safeguard company of scrutiny should be risk-based, increasing business partners and vendors, and require assets and reputation.

2 Scrutiny if and when red flags surface. effective Third-party due diligence. Whether it Understand the business rationale for Responding to these emerging standards in be the Foreign Corrupt Practices Act (FCPA). including a third party in a transaction. The a standardized and efficient way presents a in the United States, the UK Bribery Act, or company should understand the role and need large operational challenge. management is recently enacted anti-corruption regulations in for the third party and ensure that contract often challenged by widely varying information Brazil, Russia, China and Mexico, governments terms specifically describe the services to be availability across markets, and fragmentation are taking clear steps against the practice performed and the potential risks involved of their own internal systems. The question of making improper payments through with those services.

3 Becomes: how do you create one consistent, third parties. practical diligence process for third parties in The Criminal Division of the United States Monitor your Third-party relationships once New York, Ningbo and Nairobi to mitigate third - Department of Justice (DOJ) and the they begin. Where appropriate, this may party risk? While the guidance is in the context Enforcement Division of the United States include requiring and exercising audit rights, of anti-corruption controls, these principles Securities and Exchange Commission (SEC) updating existing due diligence, providing are helpful in dealing with risk among third recently provided guidance on compliance regular training and requesting annual parties generally. with the FCPA. compliance certifications by the third party . The DOJ's and SEC's FCPA enforcement actions demonstrate that third parties, including agents, consultants, and distributors, are commonly used to conceal the payment of bribes to foreign officials in international business transactions.

4 A Resource Guide to the Foreign Corrupt Practices Act, Department of Justice (DOJ) and Securities and Exchange Commission (SEC), November 2012. Third-party risk management 1. Meeting the challenge The EY Integrity Diligence teams understand this 3. Integrity. A careful approach towards Local language research utilizing jurisdiction problem. We help clients design, implement and applicable laws for data privacy and specific resources maintain effective Third-party diligence systems collection in relevant jurisdictions Analysis of ownership structure to uncover on a global scale. Our offering builds upon years beneficial owners and identify potential The global, multidisciplinary EY teams of conducting complex international fraud and conflicts of interest incorporate in-depth research and analysis corruption investigations, as well as fraud and to support better-informed decisions when Real asset searches corruption risk consulting projects, in every evaluating third parties.

5 Our research major market worldwide. Identification of links to government, including can include: contracts awarded, and potentially vulnerable EY's Integrity Diligence offering is designed to Comprehensive reviews of available sanction, relationships with other entities respond to the following client needs: embargo and watch lists and other compliance Interviews with subject entity personnel or 1. Consistency. Standardized risk-based databases to identify parties suspected of other individuals pertinent to the investigation procedures for diligence that can be wrongdoing, politically exposed persons practically implemented wherever our (PEPs) and state-owned entities (SOEs) Site visits to the subject entity's headquarters clients do business worldwide or other operations Public domain searches and adverse 2. Accessibility. The ability to continuously media inquiries update and monitor the diligence program Review of public records databases, such as from local market to headquarters, as criminal and civil litigation, liens, bankruptcies well as a broad global network of forensic and regulatory infractions professionals who sit where our clients and their third parties sit Using open source information from.

6 We develop reports that address the following: Background, Market Compliance databases reputation and reputation and ethical track credentials record Corporate data repositories Regulatory Business history, Country-speci c databases and litigation activities and history operations third party News and media Associations Suspected Social media or relationships involvement in of potential bribery or concern Allegations corruption Global market reporting of illegal or unethical business practices 2. The Integrity Diligence Approach The EY Integrity Diligence practices offer a tiered Level II: Level I + localized public records manage third party applications, background strategy for background diligence: archive search (such as local court filings). diligence results, risk ratings, approvals, compliance confirmations and contracts in a Quick Scan: Online watchlist and adverse Level III: Level II + field research such as site single repository.

7 It also can be customized to media check. visits and interviews. guide users through a standard decision tree Level I: Quick Scan + more detailed online Our web-based EY_ID technology platform is when evaluating risk factors in diligence. The company and executive background research. a globally accessible program management result is an interactive decision management Performed both from global diligence talent tool that helps executives centrally coordinate tool which also serves as a searchable archive hubs as well as local jurisdictions. this complex diligence process. EY_ID helps to of your diligence activity. EY_ID Diligence management Platform Monitoring Contract & Certification Acceptance 3rd party data form Risk Scoring Quick Scan or Level II Level III. Level I Diligence Diligence Rejection Third-party risk management 3. Our global capabilities EY Integrity Diligence services are delivered Our global teams are coordinated so resources do business, and have helped companies in all by our member firm Fraud Investigation & are available to respond to challenges efficiently industries execute Third-party due diligence Dispute Services (FIDS) teams.

8 FIDS serves in both English and local languages while requirements and build compliance programs to multinational companies on sensitive understanding the intricacies of local public address corruption risk. We're ready to help you engagements and brings the international scale, records databases and regulations. make the right decisions. local knowledge and experience necessary Our more than 2,500 EY FIDS professionals in to effectively investigate third parties and member firms in 68 countries around the world document our findings in an actionable report. are located virtually everywhere our clients 68 Member Firm 130 countries in FIDS practices which FIDS has performed 143 partners investigations or 2,500 FIDS compliance work professionals Countries with dedicated FIDS. professionals 4. EY Americas Contacts John C. Auerbach Ernst & Young LLP.

9 New York +1 212 773 3181. Frederico Gebauer Ernst & Young Sao Paulo +55 11 2573 3000. Kevin J. O'Connor Ernst & Young LLP. New York +1 212 773 6647. EY | Assurance | Tax | Transactions | Advisory About EY. EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.

10 For more information about our organization, please visit Ernst & Young LLP is a client-serving member firm of Ernst & Young Global Limited operating in the US. About EY's Fraud Investigation &. Dispute Services Dealing with complex issues of fraud, regulatory compliance and business disputes can detract from efforts to succeed. Better management of fraud risk and compliance exposure is a critical business priority no matter what the industry sector is. With our more than 2,500. fraud investigation and dispute professionals around the world, we assemble the right multidisciplinary and culturally aligned team to work with you and your legal advisors. We work to give you the benefit of our broad sector experience, our deep subject-matter knowledge and the latest insights from our work worldwide. 2014 EYGM. All Rights Reserved. SCORE no. WW0350. 1308-1125190 NY.