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Although offset obligations are often determined by the purchasing government, there are several steps that companies can take to increase transparency and, therefore, minimise the associated corruption risks.
Offsets
Offset, i.e. the execution of compensation transactions of any kind in the customer's country, is an essential factor in the public procurement of defence products in many jurisdictions. As a typical defence topic, we address offset thoroughly where it arises, i.e. in our business unit Marine Systems, the business unit as such engaged in naval defence business, therefore being regularly and immediately exposed to customers’ offset requirements. In rare occasions, offsets in this sense may occur in other business units and is then scrutinized in depth by the legal and/or compliance departments.
For the business unit Marine Systems this means that the existence of offset obligations must be assumed in almost all major customer projects. As a rule, offset is subject to local statutory or similar provisions. With the Industrial Cooperation (ICO) Department, the business unit Marine Systems has established a department which is specifically dedicated to and responsible for direct and indirect offset, its processes and the risks associated with offset arrangements.
The Regulation Offset describes a uniform standard for offset arrangements in the business unit Marine Systems. As per its underlying risk-based approach, the Compliance Function’s involvement is mandatory for all defined medium and high risk offset activities. The underlying process embeds the Compliance Function in a very detailed way into the process with interfaces to other stakeholders apart from the ICO Department, such as Sales, Procurement and Legal.
From a different angle, offset also is subject to weekly compliance alignment meetings (which are reported to the thyssenkrupp HQs), regular compliance audits as well as preventive compliance risk assessments, such as the Compliance Dialog at thyssenkrupp Marine Systems, conducted in 2019.
Offset, i.e. the execution of compensation transactions of any kind in the customer's country, is an essential factor in the public procurement of defence products in many jurisdictions. As a typical defence topic, we address offset thoroughly where it arises, i.e. in our business unit Marine Systems, the business unit as such engaged in naval defence business, therefore being regularly and immediately exposed to customers’ offset requirements. In rare occasions, offsets in this sense may occur in other business units and is then scrutinized in depth by the legal and/or compliance departments.
In our business unit Marine Systems, we have therefore imposed a strict compliance process for offset obligations. A Compliance Officer in charge for the marine business has to be involved in every offset business and will conduct a thorough risk assessment. The process is described in the Marine Systems Regulation Offset.
For each offset project, a written description has to be submitted, including a description of the industrial rationale of the project. Based on the individual project description, the Compliance department performs a due diligence on the relevant partners (which may include on-site visits) including brokers – if any – and beneficiaries and identifying potential conflicts of interest. In addition, for the potential involvement of offset service providers (including offset brokers) the use of the thyssenkrupp group-wide Business Partner Compliance Tool (BPCT) is mandatory (for further details on the tool and the regulatory framework see our responses to the questions on Third Parties, Agents and Intermediaries). In this context it needs to be noted that thyssenkrupp has recently terminated all relationships with its former offset service providers/ brokers, and is not using any further such providers.
Furthermore, the Marine Systems Regulation Offset defines further safeguards that need to be observed when dealing with offset providers.
The Compliance Function is tasked with analysing the compliance risks both in the concept phase of any offset project as well as in its subsequent bidding phase by providing the relevant written compliance statements (which statements will then serve as basis for management approval).
In the defence business, contract details are generally subject to absolute confidentiality, as they deal with security aspects.
In the defence business, contract details are generally subject to statutory confidentiality, as they deal with security aspects and materials classified by the relevant jurisdiction. The publication of details is therefore not permitted.