Post By: Shin Jae Kim
COVID-19 has brought unprecedented times for companies across the globe. In view of the ever- growing challenges, organizations are being forced to take extraordinary and emergency decisions to ensure business continuity in different locations and legal frameworks. And having to make these decisions while safeguarding the well-being of employees.
In this scenario, compliance officers should stay alert and reinforce certain measures to mitigate legal and reputational risks post-crisis. This is especially true in relation to interactions with public officials.
The Brazilian government has taken aggressive initiatives in relation to public procurement to facilitate any purchase necessary to combat COVID-19 (based on the COVID-19 Act and related provisions)¹. These measures include, among others, (i) possibility of contracting with debarred companies; (ii) assumption of state of emergency and necessity of amounts purchased; and (iii) dispensability of technical studies to ground purchases and, exceptionally, of price quotations.
In parallel, federal, state and municipal governments are calling the private sector for donations of assets and services to assist in combating COVID-19.
The interaction with public officials in circumstances of risk, such as in emergency contracting and donations, opens the door for increased scrutiny by controlling agencies both during and after the crisis. It also opens the door for increased risks of corruption and fraud in public tenders and government contracts.
The Brazilian Clean Companies Act (Act 12,846/2013) provides severe penalties for companies engaging in corruption and fraud in public tenders and government contracts under a regime of strict liability.
Here are five measures that companies can take to mitigate the risks of doing business under these extraordinary circumstances:
- Reinforce internal policies in relation to interactions with public officials. The fact that the Government is loosening up its procurement procedures does not mean that such policies should be overlooked or waived;
- Reinforce internal policies in relation to public procurement and government contracts, including diligence for distributors, resellers and commercial representatives;
- Involve the legal and compliance areas in the oversight of sales to the government, both in public tenders and contract performance;
- Document extensively the conditions that resulted in emergency contracting and the internal decision-making process, including rationale for pricing strategy and amounts sold and/or services rendered;
Monitor whether corporate governance rules are being duly complied. Exceptions to existing rules should be made by empowered corporate bodies and have the corresponding rationale duly recorded.
About the Author: Shin Jae Kim is based in Sao Paulo, Brazil and a partner at the law firm TozziniFreire Advogados. She is a member of the SCCE/HCCA board of directors