Issue link: https://digital.shearman.com/i/1300408
24 THE IMPORTANCE OF COMPLIANCE IN THE FACE OF THE ECONOMIC DOWNTURN The mining industry consolidation that is taking place in response to the recent economic downturn, marked by an increase in business combinations and asset purchases, may lead one to question the importance of compliance while mining businesses focus on economic survival. Now more than ever, however, compliance needs to be a key area of focus for mining companies. Many companies are now facing fiscal pressures that may lead to budget cuts, reduced compliance staffing and a temptation to cut corners, all of which can contribute to heightened compliance risks. Additionally, participation in various economic stimulus programs offered by many countries may lead to greater government interaction, which in turn increases the potential corruption risk. For these reasons, it is imperative that companies be particularly vigilant and take steps to ensure that their compliance programs are adequately equipped to effectively mitigate these heightened risks. This includes performing adequate due diligence on potential business partners and acquisition targets, implementing robust internal controls and ensuring that company employees are adequately trained to detect potential red flags and take the necessary follow-up measures. While companies may need to adapt its compliance practices to take into account new practical realities and limitations, such adaptations should be risk- based, defensible and well-documented. If the proper steps are not taken, mining companies face not only enforcement risk, but also reputational risk and overall business risk. OUTSIDE OF THE CONSOLIDATION/ACQUISITION CONTEXT, THERE ARE OTHER AREAS WHERE MINING COMPANIES MIGHT FACE POTENTIAL ANTI-CORRUPTION COMPLIANCE RISKS. Historically, mining companies have tended to operate in under-developed or developing countries, where there is often pressure by local governments to engage in various corporate social responsibility efforts to support the local economy. With the recent global pandemic and the ensuing strain on local economies, mining companies may find themselves being called upon even more by local governments to assist with providing basic social services, contributions to local charities and other forms of economic support. Companies should also ensure that they have the necessary compliance policies, procedures and internal controls in place to monitor such payments. What has the Mining Industry Stopped Talking About? (cont.) FOR MORE INFORMATION PLEASE CONTACT: Marwa Elborai Partner London T +44 20 7655 5524 marwa.elborai@ shearman.com Cynthia Urda Kassis Partner New York T +1 212 848 7969 curdakassis@ shearman.com Paula Anderson Partner New York T +1 212 848 7727 paula.anderson@ shearman.com Anthony Lepere Partner London T +44 20 7655 5518 anthony.lepere@ shearman.com