Corporate Social Responsibility or Corporate Embarrassment ... - Kroll Advisory Solutions.pdf · Corporate Social Responsibility or Corporate Embarrassment: Monitoring Your CSR Projects

Corporate Social Responsibility or Corporate Embarrassment: Monitoring Your CSR Projects October 16, 2012

Proprietary and Confidential — Kroll

Kroll’s Experience

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» Kroll’s experience in CSR and similar Projects – Due Diligence

– Monitoring

– Investigations

» In Canada and throughout the world


Kroll’s engagements in the last 12 months We operate in varied and interesting territories

3 Proprietary and Confidential — Kroll

CSR- Spectrum of Services

Program Design & Advisory

Education Hotlines & Case Mgmt

Investigations Data Collection

& Mgmt

Discovery & Risk Scoring

Due Diligence Research

Management of formal programs to train company executives and staff involved in CSR initiatives

Implement a system for reporting suspected inappropriate conduct (“whistleblower lines”).

Develop corporate policies to ensure adequate documentation to support project initiatives (i.e. contracts, work plan)

Continuous monitoring of project initiative and progress

Tier and flag parties based on risk

Research and analyze parties for any issues of concern

Implement rules, controls and procedures

4 Proprietary and Confidential — Kroll Advisory Solutions

Monitoring

Prevention Remediation

Investigation of suspected inappropriate conduct, activities and/or diverted funds

Case Study: CSR Project Gone Awry

§ The Plan » Client committed 2-5% of gross profit for its sustainability efforts

» Working with community leaders to identify community needs

» Committed to building a local school


Case Study: CSR Project Gone Awry § The Reality

» The school was never built

» The funds were allegedly spent by the community leader for his own personal “endeavors”

» The Client was still responsible for building the local school

» The project costs more than doubled in light of misappropriation of funds and additional monitoring required on a go-forward basis


Case Study: CSR Project Gone Awry

§ Hindsight and Next Steps » No due diligence was conducted on the community leader, who had

previously engaged in fraudulent activities

» No supporting documentation existed to identify where the money went

» Company had limited budget and decided to obtain quarterly satellite images of the site and the progress of the project

»  Limitations of this approach include: –  Only shows that a physical building is constructed

–  No program in place to show on-going efforts related to hiring teachers, supplies purchased for the school, and that the facility was actually going to be used for its intended purpose


Common Issues Identified

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» Lack of Transparency

» Lack of Due Diligence

» Lack of Accountability and Expertise

» Failure to Stage Funding

» Failure to Fund Operating Costs

» Absence of Effective Right to Audit


Lack of Transparency

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» Inadequate disclosure of agreed CSR activities

» Inadequate disclosure of financing of CSR activities

» Failure to identify responsibilities of parties involved


Lack of Due Diligence

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» Failure to screen parties involved in CSR Project – Project Managers

– Key Vendors and Consultants

» Significant abuse by related individuals and entities – False invoicing

– Inflated invoicing

– Inadequate or dangerous workmanship


Risk Assessment/Segmentation

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Levels of Review

Low Risk

Medium Risk

High Risk

Investigation


Lack of Accountability and Expertise

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» Inadequate or inappropriate project management

» Lack of defined responsibilities

» Lack of corporate oversight


Failure to Stage Funding

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» Worst abuses occur when funds provided up front

» Tie funding tranches to project milestones

» Onsite inspection by trusted source


Failure to Fund Operating Costs

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» Failed projects harm the sponsor’s reputation

» Ensure appropriate arrangements for operational needs – Operational funding

– Personnel

– Supplies

– Utilize CSR specialists to ensure objectives being achieved


Absence of Effective Right to Audit

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» Limits ability to verify expenditure and activities

» Loss of control of CSR activities


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Questions and Answers


Contact Information

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Deborah Gold Managing Director [email protected]

Lynn Correia Senior Director [email protected]


Documents

Corporate Social Responsibility or Corporate Embarrassment ... - Kroll Advisory Solutions.pdf · Corporate Social Responsibility or Corporate Embarrassment: Monitoring Your CSR Projects