SBJ/Jan. 27-Feb. 2, 2014/Opinion

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  • What companies must know about global anti-corruption laws

    Corruption and bribery are critical risks companies investing in upcoming high-profile sports events like the 2014 Winter Olympics in Sochi, the 2014 World Cup in Brazil and the 2016 Summer Olympics in Rio need to be prepared for.

    Global sporting events have been notorious for their many and recurring scandals over the years. Add to this mix the fact that Brazil and Russia have long-standing and complicated histories of endemic corruption, and the opportunities for scandal and reputational damage are magnified and concentrated.

    Business can no longer afford to be willfully blind about corruption. The past decade has witnessed a dramatic rise of global anti-corruption laws and enforcement especially in the U.S. and Europe, but also in places like Brazil and Russia, which never before had anti-corruption laws of this type, let alone enforcement. At the same time, the opportunities for corruption in such countries remain great. According to Transparency International’s Corruption Perceptions Index for 2013, ranking 177 countries’ public sector from cleanest to most corrupt, Brazil and Russia ranked 72nd and 127th, respectively.

    Not every business knows that both Brazil and Russia recently adopted international anti-corruption laws similar to the U.S. Foreign Corrupt Practices Act, with implications and consequences yet to unfold. Brazil adopted a Clean Company Act this year, making companies, not just individuals, liable for international corruption and allowing the imposition of fines up to 20 percent of a company’s gross revenue.

    NATIONS TAKING ACTION

    Business should take note of the rise of global anti-corruption laws and possible enforcement not only in Russia and Brazil but also in almost 40 other countries, including China.
    The mix of increased national and international law enforcement cooperation means that Russia, Brazil and others:

    Will have a larger arsenal of laws to use fairly or unfairly against specific corporate targets.
    Can collaborate across borders with other national (like the U.S.) and global government agencies (such as Interpol) to bring multi-jurisdictional cases against companies.
    May find additional domestic and international laws to include with bribery and corruption charges such as tax evasion, money laundering, human rights, labor, and health and safety violations, to name a few.

    Russia adopted its first international anti-bribery and corruption law last year. And that is in a country with a history of serious and sometimes deadly corruption scandals, epitomized recently by the Sergei Magnitsky case, where a whistleblower lawyer died in prison, refusing to renounce well-founded bribery accusations he had made.

    So how do global companies participating in these major sports events successfully mitigate this major global risk?
    If they haven’t already, companies must develop a comprehensive global anti-corruption program with specific bells and whistles designed for their sector, geographical footprint and business strategy, containing several major components:

    1. Commitment from the top. It begins and ends with CEO, C-suite and board commitment. Without it, a company and its employees are at serious risk.

    2. Global code of conduct program and lead. A code or the equivalent must be in place and properly structured and resourced. Every team needs a captain; consider having a chief risk and reputation officer to lead this program.

    3. Country risk assessment. Have a systematic approach to knowing all relevant details about where you’re doing business. Scouting the parameters of new territories should be second nature to sports-oriented businesses.

    4. Ethics and compliance risk assessment. The specific assessment should be one that specifically understands how corruption penetrates the sports industry: Are you building a stadium or other sports facility? Beware of construction license bribery. Are you sponsoring or advertising locally? Make sure you are vetting local parties to avoid money-laundering implications.

    5. Third-party risk assessments. Have a system, human and software propelled, for knowing and documenting with whom you’re dealing — partners, sponsors, consultants, agents, representatives, etc. One of the deepest dangers of large sports gatherings is the proliferation of illegitimate, fraudulent and organized crime-connected parties. Make sure your company has a proactive third-party vetting program in place.

    6. Properly equip employees and third parties. Give your employees and representatives proper and recurring education, options and resources to solve dilemmas and concerns in real time. Your training should be customized to your business and specific sports-related activities so it is relevant, impactful and entertaining.

    7. Have an anonymous resource. A hotline or help line can help your employees and third parties when they’re not able or too scared to speak up directly. This is especially important and required by law for publicly traded companies with a U.S. connection but gets complicated in other jurisdictions and requires a systematic and vetted approach.

    8. Continuously improve. Apply lessons learned and do so continuously. Isn’t that what strong sports teams and athletes do? Learn from your mistakes and near misses and become a stronger player.

    9. Hire the best and brightest local management. They will be your single most vital risk mitigator. There is nothing like having a home team advantage, and the best defense is an aggressive local offense against corruption.

    10. Customize. Don’t use a cookie-cutter approach: Understand your risks from the specific standpoint of your business sector, your company history and your strategy. In sports-related businesses that means customizing your program to be relevant to the sports program you sponsor or the sports-related activities you are focused on, whether advertising, sponsoring, acquiring, trading or building.

    Companies must be ready to deal with the certainty that their employees and third parties will face requests for illegal bribes and the possibility of being accused of (and, in high-risk countries, even being arrested for) bribing or appearing to bribe. Witness the unfolding GlaxoSmithKline case in China.

    Companies also must be prepared for the new reality that their executives and boards — wherever they may be located — might also become implicated and even legally liable if such bribery occurs. There is no longer any doubt about it: Corruption and bribery, both public and private, pose serious risks to reputation, the bottom line and, in some cases, personal freedom.

    Bribery and corruption are as old as some other unappealing human behaviors. Civil society, the private sector and governments are cooperating more than ever and dramatically raising the bar on the global fight against corruption. Corporations that pay heed to this risk will avoid the worst of its consequences and maybe even gain a competitive advantage.

    Andrea Bonime-Blanc (abonimeblanc@gecrisk.com) is chief executive officer of GEC Risk Advisory.

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  • Cartoon: Take it outdoors

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  • Brands navigate potential collision between sport, social unrest

    Is sport a cause of social unrest, a tool to address inequality or a platform from which to communicate political injustice?

    As we near the Sochi Olympic Winter Games, a long-simmering kettle of religious, political and social unrest has the potential to collide with the world’s largest peaceful gathering of nations. What should be universally viewed around the world as an exhibition of sport at the highest level of competition is being lauded as, among other things, “a festival of corruption.” Further, Sochi has become a lightning rod for social issues, such as anti-gay legislation, and security concerns in the wake of bombings in nearby Volgograd and threats from militant extremists in the Chechen region.

    Since before the modern-day Olympiad, religious, political and social unrest has always weaved its way into the fabric and the shadows of sport. Whether it was rioting during the second North American qualifying round of the 1970 FIFA World Cup when El Salvador and Honduras were at war, or the India-Pakistan cricket truce, sport and politics have always made for interesting global bedfellows.

    More recently, those who feel they have been repressed have gained a greater voice through social media, political means or sheer terror, and they are increasingly using the platform of global sport to forward their cause.

    Photo by: GETTY IMAGES
    Using global sport to ignite a nation, or to advance a company’s business objectives through sponsorship, is not a strategy for the squeamish or faint of heart. In spending an estimated $51 billion, Russia is incurring very certain costs today for very uncertain future benefits. So, too, are the Olympic and Sochi 2014 sponsors.
    December terrorist attacks in Volgograd (top) have raised security concerns in Sochi.
    Photo by: AP IMAGES

    Hosting global sport has the opportunity to catapult a city or country by leaps and bounds. It serves as a catalyst for development projects like stadiums, transportation and hotel construction, reallocation of land use, fortification of emergency services, foreign investment, image overhaul, and more.

    When other social factors combine, a true barometer for gauging the full impact on sport and society is formed. This includes “softer measures” that have equal, if not greater, economic impact on a host nation and its residents, such as the psychological index of a nation’s citizenry, education, decreases in mortality rates, and even sustainability and legacy programs. These are equally profound, if not more so, in showcasing the true effects of sport on society.

    The halo effect this has on sponsors can exponentially lift brands to new levels of recognition and reputation, create new market growth, gain government influence, and much more.

    However, today, hosting multinational sporting events seems to be less about chasing utopian dreams and more about preparing or preventing the grave challenges of social unrest. The latest news out of Sochi has again reminded us that the potential for lifting a nation through an Olympic association comes with great risk. Even more challenging for the brands underwriting the Games is that many of these risks are, almost entirely, beyond the control of sponsors.

    Companies face a certain level of vulnerability they must be willing to accept when hitching their brands and associated messages to the global sports wagon. If marketers want to bask in the glow of Olympic glory, they must also be willing to face the scrutiny their brands’ connections may have to countries with behaviors or laws their target consumers might find unusual at best, abhorrent at worst.

    Now, more than at any time in history, global sport is being awarded to emerging markets around the world. Emerging markets account for half of global GDP. Perhaps even more importantly, they’re home to 85 percent of the world’s population. For companies seeking to ensure brand relevance for generations to come, securing a market position in these emerging markets is critical to future growth and success.

    But how can companies most effectively build their brands through global sport sponsorship while mitigating the risks associated with economic, political and social unrest?

    Brands must be aware of and understand these emerging markets at a local level, not just consumer attitudes and habits, but also the social and political landscape. Social norms that businesses take for granted in developed markets aren’t always there in emerging markets.

    Brands attempting to leverage sport-related investments in these sometimes volatile markets must connect to their audiences, from consumers, to local employees, to government officials, in a manner that is relevant to and respectful of history and culture. By cultivating a deep understanding of local communities and the driving factors behind social and cultural trends, brands can best position themselves to be invited to the party rather than be seen as crashing it. Doing so requires brands to become more nimble and responsive in real time to an ever-changing marketplace, varied consumers, and disparate cultures.

    Brands seeking to limit the physical risks of engaging in sport, such as terror plots against major sporting events, have a unique challenge. Sport is not the cause of unrest but it can be a magnifier for what lies beneath the surface. And while it is unreasonable for the public to assume that sport can persuade governments to change their human rights policies or for a factional terrorist group to lay down its arms, sport has the capability of being a great unifier. The Olympic Games, despite a history that has significant blemishes, deserves credit for its commitment to exemplify inclusion over bias. For brands, the opportunity lies in seizing upon and amplifying the uniting qualities of global sport and becoming a direct contributor to this narrative, rather than an impassive guest.

    And as we look toward Sochi, the organizing committee, brands and fans should take stock of the many opportunities offered within global sport — but be ever-mindful of the politics and pitfalls.

    David Fuller (david.fuller@theglideslope.com) is a founding partner of GlideSlope.

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  • Big win for Tampa, Higgins; SBJ preps for Sochi Games

    I spent a day in Tampa earlier this month at a Business of Sports forum and was able to hear from Tampa Bay Sports Commission Executive Director Rob Higgins, who at the young age of 34 is chalking up quite an impressive résumé. He has led a group that’s landed a number of major events, including the 2016 Frozen Four. But easily one of his most impressive and recent wins was landing the 2017 college football national championship game to be played at Raymond James Stadium. The reason this one stands out is that it marks the first time the championship will be played in a city that doesn’t have one of the major contracted bowl games in the rotation.

    A fun story that personified how Higgins took a personal, extra step during the final bid process is that he personally delivered the bid books to the College Football Playoff staff in Dallas. Here’s how he recalled delivering the bid, which consisted of 13 large binders featuring more than 7,200 pages:

    Higgins personally delivered the Tampa Bay Sports Commission’s bid to host the 2017 college football national championship game to Dallas.
    Photo by: KATHLEEN CABBLE / TAMPA BAY BUSINESS JOURNAL
    “We had countless community partners involved for multiple years in helping shape our bid, so when the deadline was approaching, the thought of overnighting the bid just didn’t feel right to us,” he told me. “This was a moment and an opportunity that could impact our region in limitless ways, both socially and economically, where hopping on a plane to see it through to the end felt very natural to us.”
     
    So Higgins boarded a plane on Sept. 26, went by the CFP offices the following morning when the bids were due, and handed a binder to CFO Reid Sigmon. He then went immediately back to the airport for a flight to Tampa.

    To clarify, he didn’t lug around 13 huge binders through his travels. “We did overnight 12 of the 13 binders to meet me in Dallas,” he said, with a laugh, “so that I only had to ‘carry on’ the main binder on my flight —
    Photo by: TAMPA BAY SPORTS COMMISSION
    which had the main overview of our bid in it.” He went on to add, “Once we made the decision to hand-deliver, we considered just about every means imaginable to do so, ranging from me dressing up in a UPS outfit to bringing along some major celebrity star power. But we came to the conclusion that the most accurate thing we could do to show what the opportunity means to us was to walk in the college football offices, shake their hands, look them in the eyes, and say, ‘This is our vision for how your event could work in our community, and you have our commitment that we’ll meet and exceed your expectations, if given the chance to do so.’”
     
    He and his bid team received the news of their successful bid on Dec. 16 (You can see a video of him receiving the call at TampaBaySports.org.) Does he believe the in-person effort put them over the top? “Probably not; it was less than a five-minute moment,” he said. “But our focus was on demonstrating the mindset of our community when it comes to what this event means to us and how we plan to approach each and every day over the next three years of planning.”
     
    The cliche of “going above and beyond” and adding a “personal touch” is thrown around tirelessly and too loosely in this industry. This is an example of where it actually happened. It was a smart move and made me think we’ll hear more success stories from Higgins in the future.

    > ON THE GROUND IN SOCHI: Our coverage of the Olympics will ramp up with next week’s issue and will be followed through online with our On The Ground blog focused on the Sochi Winter Games. Olympics reporter Tripp Mickle will be on site in Russia for 17 days and will be filing exclusive reports for SBJ/SBD and our Global Daily. In addition to our coverage within our three publications, On The Ground will provide comprehensive coverage of all the business stories from the Games, everything from logistics and operations in Sochi to sponsor marketing to NBC’s ambitious coverage.

    Among the list of rules for a Sochi Games media credential: No smiling.
    The tone of the U.S. media going into these Games can best be described as one filled with angst. There aren’t many pockets of optimism spreading the promise of Sochi that I can find. I’m a big fan of The Week magazine, and a piece in its Jan. 19 issue summed up the preview themes that I’ve read. The story, “The Many, Many Problems of the Sochi Olympics,” was the most read story on its website and touched on the “bewildering decision” to host the Games in Sochi, the inflated costs becoming a “source of some embarrassment,” the perceived “corruption,” and concerns of terrorism and human rights. A companion piece looked at opinions from the Moscow media, who strongly believe the West is hoping the Games are a bust.

    Outside of those macro issues, if you’re looking for something directly affecting the sports business community, note the difficulty of just getting to Sochi and accessing the basic lodgings in the city, as we’re still hearing horror stories of accommodations being changed just weeks out. Tripp’s aware of all this and yet he’s still looking forward to the sojourn. “It’s my fourth Olympics and second Winter Games,” Tripp said. “This is the most politically significant Olympics I’ve covered since Beijing in 2008. Just as that was a coming out party for the Chinese government, the Sochi Games are considered to be [Vladimir] Putin’s statement to the world about Russia. He’s been intimately involved in these Games from the beginning, and what the country is spending to host the world is astounding.”

    > REMEMBERING BAZ: I’ve been lucky to have met so many great people over the years in this business, and one of the sweetest was the lovely Barbara Zidovsky, who was at Nielsen Sports Marketing for many years and had relationships with leagues and sports clients. Every time I met with BAZ, she has a big smile, a binder with reams of information, and story after story for me. She was a kind, animated, wonderful woman with boundless energy who, as one friend said, “helped build sports marketing from the ground up.” Though she had moved on from Nielsen, I always heard from BAZ on my birthday, and last heard from her in September. So I was very sad to hear that she died in November after a short illness. I was told she died at her home “with a peaceful smile on her face.” All of the people who knew, worked with, and were touched by BAZ will miss her.

    Abraham D. Madkour can be reached at amadkour@sportsbusinessjournal.com.

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