Transcript Corruption in Egypt

Presentation
.
Implementing ERM
1
COSO ERM Framework
Internal
Environment
•What is the internal philosophy and
culture?
Objective Setting •What are we trying to accomplish?
Event
Identification
•What could stop us from
accomplishing it?
•How bad are these events?
Risk Assessment •Will they really happen?
Risk Answer
•What are our options to stop those
things from happening?
do we make sure they don’t
Control Activities •How
happen?
Information and
Communication
•How [and from/with whom] will we
obtain information and communicate?
Monitoring
•How will we know that we’ve achieved
what we wanted to accomplish?
Source: Committee of Sponsoring Organizations
of the Treadway Commission www.coso.org.
Used with permission.
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A COSO Implementation
Multinational
Corporation ERM
program:
• 800 Business Risks. Consolidated into 20
categories:
• 2100 Common Risks Group-wide
exposures.
3
Results of Business Risk Consolidation
- Business risks in the external environment, operational processes, and internal environment External
environment
Country-specific
risks
Natural
disasters
Laws and
regulations
Operational
processes
Business partners
Customers
Technica
Subcontractor Supplier
l
s
s
partners
Delayed
technological
development
Manufacturing
Lack of
differential
technology
Increasing
competition
due to competitors'
products
Falling market
prices
Dependence on
specific business
partners
Inadequate business
partner handling
R&D
Failures to respond
to changing
customer needs
Marketing & Sales
Delayed
production
Failures of sales
channel
strategies
PL and quality issues
Cost increases (increasing inventory, soaring material costs, declining yield)
Delayed collaboration due to insufficient linkage between divisions
Internal
environment
Informatio
n
Organization
Human
resources
Internal
infrastructure and
organization
operations
Staff allocation and
development
Insufficient
manufacturing reforms
and IT innovations
Structural reformrelated issues
Competitors
Failures of sales
promotion
Business Structure
Segment
AVC
Networks
Global
and
Group
Head
Office
Home
Appliances
Business domain
AVC
Panasonic AVC Networks Company
Fixed-line communications
Panasonic Communications Co., Ltd.*
Panasonic Mobile Communications Co., Ltd.*
Mobile communications
Panasonic System Solutions Company
Systems
Panasonic Shikoku Electronics Co., Ltd.*
Home appliances, household equipment,
healthcare systems
Matsushita Home Appliances Company,
Matsushita Refrigeration Company*
Healthcare Business Company
Lighting Company
Matsushita Ecology Systems Co., Ltd.*
Lighting
Environmental systems
CISC
Components
and Devices
Panasonic
Design
Company
R&D divisions
Semiconductor Company
Display devices
Matsushita Battery Industrial Co., Ltd.*
Batteries
Panasonic Electronic Devices Co., Ltd.*
Electronic components
Motor Company
Motors
Solutions
Panasonic Automotive Systems Company
Automotive electronics
Semiconductors
Head Office
Business Domain Companies and Group Companies
FA, Corporate eNet Business Division
Others
Panasonic Factory Solutions Co., Ltd.*, and others
Sales division
Overseas
divisions
MEW and PanaHome
JVC
Matsushita Electric Works, Ltd.*, PanaHome Corporation*
Victor Company of Japan, Ltd.*
Group-wide Risk Management System for General Control
(2) Establish a G&G Risk Management Committee to address the current problems
After the Committee's
establishment
Establishing and improving Group-wide RM system
Instructing risk assessment
<Roles of the Committee>
[1] Establishing and improving
Group-wide RM system
[2] Conducting Group-wide risk
assessment
[3] Reporting to the President,
and Board of Corporate
Auditors
[4] Studying possible measures
to prepare for major risks;
suggesting such measures to
President and Corporate
Functional Divisions
[5] Improving Group-wide
support systems against
emergencies
Committee
Corporate Functional
Division A
G&G RM
Committee
Domains
Support
Subsidiaries
Committee
Corporate Functional
Division B
Support
Corporate Functional
Division C
Corporate Regional
Management
Divisions /
Regional HQs
Results of Groupwide risk
assessment
Secretariat
Collecting risk information from
across the Group
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Clarify Sections Responsible for Each Risk
(4) Information systems
1. Disasters and accidents
Earthquakes, typhoons, tsunamis, floods, and
other natural disasters
General Affairs Group, Overseas
Security management Office
Fires, explosions, airplane crashes, terrorist
attacks, and other major destructive or violent
events
General Affairs Group, Corporate
Personnel Group, Overseas Security
Management Office
2. Politics, economy, and society
Shutdown or malfunction of information
systems and communication networks
General Affairs Group, Corporate
Information Security Division
Unauthorized use of information systems
General Affairs Group, Corporate
Information Security Division
Inadequate security measures related to
information systems
General Affairs Group, Corporate
Information Security Division
(5) Environment
Wars, civil wars, conflicts, etc.
General Affairs Group, Overseas
Security Management Office
Corporate threats, abduction, and violent civil
unrest
General Affairs Group, Overseas
Security Management Office
Environmental pollution
Corporate Environmental Affairs Group
Waste treatment
Corporate Environmental Affairs Group
Environmental regulations
Corporate Environmental Affairs Group
(6) International relations
3. Operations
(1) Quality, CS, and intellectual property
PL and recall issues, other quality problems
Corporate Quality Administration
Division
Failure in complaint-handling
Corporate CS Division
Intellectual property right infringements
Corporate Intellectual Property Division
(2) Sales and procurement
Violation of security export control
Corporate Legal Affairs Division
Trade issues
Corporate Legal Affairs Division
(7) Finance
Bad loans and business partner bankruptcy
Corporate Accounting Group
Tax and accounting system changes
Corporate Accounting Group
Exchange rate fluctuations
Corporate Finance & IR Group
Violation of antitrust (competition laws)
Corporate Legal Affairs Division
Interest fluctuations
Corporate Finance & IR Group
Bribery
Corporate Legal Affairs Division
Stock price fluctuations
Corporate Finance & IR Group
Violation of Subcontractors Act
Corporate Procurement Division
Corporate Accounting Group
Soaring raw material prices and unavailability
Corporate Procurement Division
Impairment of long-term assets and deferred tax
assets
(8) Labor issues
(3) Information
Human rights issues, including sexual
harassment
Industrial Relations Group, Corporate
Personnel Group, Overseas Security
Management Office
Corporate Information Security
Division
Employment
Corporate Personnel Group, Industrial
Relations Group
Information security incidents related to products
and services
Corporate Information Security
Division
Industrial accidents
Industrial Relations Group
Health issues such as infectious diseases
Insider trading
General Affairs Group
Industrial Relations Group, Overseas
Security Management Office
Trade secret leakage
Corporate Information Security
Division
Private data leakage and violation of privacy
7
Corruption in Egypt
Sample Project for Gb699
2009 CPI Rank: 111 of 180 countries
2009 Score: 2.8
Previous ranking: 115
Compare to:
United States rank and score: 19th, 7.5
New Zealand rank and score: 1st, 9.4
A history of vast corruption…
In 2008, the United Nations published the
Egypt Human Development Report.
The results called on the civil society to act
as a “third pillar” in developing the country
as they have been failed by both public and
private administrations.
As a result of the vast corruption, Egypt’s
development has remained stagnant while
the disparity between the wealthy and poor
has increased.
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The World Bank
says that poverty
in the 2004-2005
years is equivalent
to that of 19951996.
CPI dropped from
70th to 105th from
2006 to 2007.
New York Times:
45 percent of
Egypt’s
population
survives on < $2
per day.
The Corruption of Bread
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Bread, sugar and tea have been
subsidized since WWII.
Provisions are the most corrupt sector
in Egypt.
$2.74 billion spent on subsidies
-more than on healthcare, education
Creates significant black market value.
As a result…
Government sells flour $1.50 per sack for
a profit of $10 per sack.
An inspector must certify that the baker
has used flour properly for 3 months in
order for baker to receive $1/sack refund.
Inspector is bribed by baker with black
market sales and inflated prices.
In a study by the Al Ahram Center for
Strategic Studies, 28.5 percent of
respondents attribute inflation and increased
prices caused by corruption.
88 percent blame it on low wages.
After 20 years, the bakery inspector
makes $55 per month to feed a
family of ten.
"The state-businessmen relations in
Egypt are an illegal and
unconstitutional marriage.”
Abdel Khaleq Farouk, economist
L.A. Times, March 1, 2009
Business Anti-Corruption
Snapshot
Executing a commercial
contract requires and
average of 42
procedures and takes
1,010 days.
It takes 6 years to settle
business dispute in
court. (Heritage
Foundation, 2009)
Corrupt police officials will
buy shops and
properties off of
detainees.
7.3 percent of annual
sales spent on bribing
officials.
No tenure for low level
judiciary. Wages low
and bonuses
contingent on higher
levels.
Environmental ministry is
lowest paid and has
most high-level
scandals in 5 years,
with 10.
2006 Ferry Disaster
1,035 people are killed when the ferry catches fire
and sinks in the Red Sea.
Recovered bodies are put in unlabeled
garbage bags. Only riot police are sent to
assist concerned family members.
An investigation finds that the ferry owner,
Mamdou Ismail,a parliament employees is
related to the owner of Egypt’s safety
inspection company.
The 600 page report indicates incompetence
by authorities and neglect by the ferry
owner. He flees to London and is acquitted.
The incident symbolizes Egypt’s corruption.
A Corrupt Education..
“What remains is a decomposed
corpse that yields nothing worthy of
meaning and to the stench of which we
have become thoroughly
desensitized.”
Al Ahram, June 25, 2008 editorial
A Cycle of Poor Regulation:
-June 2008: Daughter of Egyptian parliament
member accused of selling national exams
that are essential to determine college
enrollment.
Lack of proper oversight leads to an exam
riddled with errors, impossibly difficult
questions.
Suicide is common for students that fail the
exams. Students that pass can incur debt for
private tutoring they need because of poor
schools. Overcharging tutors are the same
professors.
Babies Killed in Power Outage
July 2008: 4 babies die when a hospital loses power for
3 hours and the generator fails.
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Outrage spreads in Egypt when a mobile
phone captures doctors trying to resuscitate
5 infants at a hospital without power.
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Healthcare and education are free in Egypt,
however, public spending has been cut. In
2001, national spending was 2.4 percent, in
2006, 1.3 percent. Egypt has seen 7 percent
economic growth, yet most goes to wealthy.
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Doctors are paid $47 per month.
Optimism for future?
Transparency on the horizon..
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Transparency is
improving with rise in
Internet popularity.
Egypt uses 2nd most
Internet in Africa (8.6
million users).
40 percent of
population between
ages 15 and 40.
USAID-funded Nazaha
website to raise
awareness by reporting
corruption from 23
sources.
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Egypt signed UN
Convention against
corruption.
51% believe
democracy will help.
Established 4 councils:
Committee of Integrity
and Transparency,
Administrative Authority
Council, Central
Auditing Agency, Public
Funds Prosecution,
Administrative
Prosecution Authority.
Sources
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New York Times
New York Sun
Times
L.A. Times
Reuters
BBC
Transparency
International
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Business AntiCorruption Portal
PoliticsOnline
Al-Ahram