While the sprawling Petrobras scandal continues to take down key executives, government officials and most recently, politicians, companies are starting to prepare to operate in a new regulatory environment as the country continues to sink into the further despair of recession.
On Friday, a Senate committee recommended that Brazil’s President Dilma Rousseff stand trial as allegations surfaced that she broke budget laws. Rousseff is also being investigated by an electoral court for using bribe money to fund a 2014 re-election campaign, Reuters reported. Rousseff isn’t the only politician facing intense scrutiny. Last week, a Brazilian Supreme Court Justice called for House Speaker Eduardo Cunha to resign from his positions as House Speaker and federal deputy amid corruption charges relating to the Petrobras scandal.
“The current scenario brings a better perspective of business environmental and the risks of doing business in Brazil,” said Sao Paulo-based Shin Jae Kim, Partner, TozziniFreire Advogados. “Before doing business, companies should conduct a comprehensive risks assessment based on specificities related to proposed business.” As the Petrobras corruption saga continues to unfold, this assessment will be a critical element that will build and improve compliance programs. Companies will establish their priorities based on the results of a risk map and each company will be able to develop policies, procedures and rules in order to prevent, detect and remediate violations and irregularities to minimize risks in their businesses.
“Worldwide, countries have responded to corporate scandals by issuing regulation on corporate governance and Brazil is no different,” added Kim. For example, the creation of different segments of the stock exchange (Novo Mercado, Level 1 and Level 2) based on “good governance practices” is more than 15 years old. “But corporate governance is becoming ever more important because it provides the necessary tools for deterring and preventing corporate scandals.”
About 10 companies have been caught up in the Petrobras corruption scandal but according to reports, the Brazilian comptroller general’s office is currently negotiating U.S.-like leniency deals, which will ease the sanctions on companies if they come clean about misconduct.
“A number of companies have been implementing compliance programs and have been concerned about it especially its international reach,” said Salim Saud Neto, Partner at Rio de Janeiro-based law firm Saud Advogados, in cooperation with Hughes, Hubbard & Reed LLP. “The problem is, only after companies implement compliance programs— even domestic ones, there remains a shortage of professionals in the market.”
Upcoming events:
Take this conversation further on June 8-9 in Sao Paulo, Brazil for our 4th Annual Latin America Ethics Summit. Hear from members of the C-suite and other leaders from top-performing companies. For more information and to take advantage of our early bird discount rates, click here.
