Distinguished guests, ladies and gentlemen: welcome, and thank you for your attendance.
Today’s seminar is a follow-up to the program for our suppliers held in January, 2011.
We are delighted to have with us today, representatives from the National Anti-Corruption Commission (Nazaha), the President of TRACE International, and representatives from Al Abdulkarim Holding, and Deloitte.
Each will be sharing unique knowledge and experiences.
At our 2011 events, we launched the Saudi Aramco Supplier Code of Conduct.
Since the beginning of 2011, we have enjoyed welcome progress regarding honesty, transparency, and ethical conduct in our supply chain, and we both commend you and thank you for your role in this.
But there remains much to be done.
Today we will re-introduce the Supplier Code of Conduct, and highlight some changes that have been made to further enhance its effectiveness.
It is now clearer and stronger in protecting all of our mutual interests and those of other stakeholders.
We also launch our Ethics and Fraud handbook, designed to provide organizations with guidance on how to implement ethics and fraud control programs, and thus help you comply with the new code.
Finally, we are here today to share knowledge and experiences, with keynote presentations from Nazaha, Trace International, Al Abdulkarim Holding, Deloitte, and my colleagues in Materials Supply.
But why are we doing this?
Because we aim for the total integrity of our supply chain.
Saudi Aramco continuously reminds all our employees of their responsibilities for ethics, highlighting integrity, one of our five corporate values, in everything we do.
Today, I invite you, our supply chain partners, to share these values. We need your active support so that we can jointly achieve our value-based goals: Goals such as being fair in all our dealings, creating trust, showing respect, and standing up against misconduct.
And this links with another of our values: accountability. This means personally taking ownership, accepting responsibility, and leading by example. We all know that the ethical status of any company depends upon the tone at the top. And the ethical status of the supply chain depends on all of us setting the right tone, and leading by example.
Ladies and gentlemen, we cannot succeed alone, but we will succeed together.
Since our last seminar, Saudi Aramco has launched an Accelerated Transformation Program or ATP.
We are thrilled to say that realization of the ATP will create tremendous new opportunities for business growth, job growth, and higher profits for our suppliers.
This will definitely create a greater volume of economic activity, and enhance the quality of our technologies, products and human resource development.
But organizations pursuing this growth and development must realize that they could also be creating new occasions and temptations for fraud. The dark side of innovation is that thieves and embezzlers strive to keep abreast of innovation too.
Only recently, a former accounts clerk for a major health care group admitted using her computer to access the organization’s accounting software, to issue checks payable to herself and others.
She attempted to conceal the fraud, by altering the electronic check register to make it appear as if the checks had been paid to the company’s vendors.
The fraudulent scheme resulted in losses of at least $800,000.
So you see we must continually upgrade our safeguards against fraud.
We need to work together to protect the fruits of our honest labor.
And work together we must, as our destinies are interlinked.
We are not operating in a closed system. Activities between us may take place within the Kingdom; nevertheless, these activities can come under scrutiny by business and financial analysts, governments and law enforcement authorities from around the world.
And, as I mentioned in our seminar last year, financial risk premiums increase as reputation decreases. Since then, the Kingdom has maintained good and improving credit ratings. Public finances here are among the strongest in the world – in sharp contrast with some of the world’s large industrialized economies.
Still, the Kingdom’s Standard and Poors ratings are not as strong as those of some countries that are mired in recession and debt. Why is this?
The answer is, because of the industry and the region we are in.
The Transparency International organization does excellent, unbiased research to let the world know what are the perceptions of corruption in various countries and industries. In their most recent survey, the oil and gas industry received one of the lowest rankings – 16th out of 19.
Those industries ranking lower than oil and gas are also activities many of your firms are involved in: real estate, utilities, public works contracts, and construction.
Now, compound these factors with our geographical situation. It will come as no surprise that our region does not have the highest reputation for business honesty and integrity.
Not only that, procurement and contracting professionals worldwide have particular exposure to potential bribery, fraud, and other forms of dishonesty.
It’s in the nature of our work. So we know we operate in an area of risk.
On average around the world, fraud robs businesses of about five percent of their income each year. With some businesses, that alone can be a make-or-break margin.
Cases of alleged fraud in the UK alone soared by 150% in 2011, to a record £3.5 billion, with scams which appear to be perpetrated by companies' own management rising in value by 74%.
But the harm to businesses is not simply in the form of direct financial losses.
Terrible harm also comes from corrosion of internal morale and external reputation. These are factors that can cause, and indeed have caused, prominent companies to collapse.
And these factors are driving changes in the legal landscape.
Domestically, the launch of the National Anti Corruption Commission, Nazaha, clearly highlights the zero tolerance policy our government is taking with fraud, as does the just-completed business and work ethics forum in Jeddah.
And you are all aware, I am sure, of the action Saudi Aramco takes when fraud is uncovered. Whether the perpetrator is an employee, or a supplier, we too show zero tolerance. When fraud is uncovered, the responsible employees are terminated, and suppliers are suspended.
This is as it should be. We must all be seen to be living, and enforcing, our values.
Laws and enforcement are becoming much stricter in the major trading countries too. And their reach is global.
You need only read some of the most recent news headlines to know that one of the most successful consumer retail firms in the world is now under a dark cloud of investigation because of bribery and cover-ups.
In this instance, U.S. authorities are taking action against a company for its behavior in another country.
Any company can be targeted by these authorities, even if the only link with the U.S. is a financial transaction in U.S. dollars, or use of a U.S. based server.
Of course, bribery and fraud are always wrong, in all places. Moral truth is universal and unchanging.
But what is changing is the energy and effectiveness of some major governments to litigate and punish bribery and fraud. Any business that considers itself untouchable had better think again.
There is an abundance of information about the more stringent anti-fraud laws and legal policies of the United States, the United Kingdom, and the European Union countries. None of us can afford to be uninformed about this new legal environment. To protect our companies and ourselves, we must keep up to date with legal developments, locally and worldwide, which affect us. And we are here to help.
Saudi Aramco values our relationship with our suppliers. Some of our business relationships have endured for many decades, generating jobs and economic growth for families, communities and the nation.
We each share a stake in the integrity of the supply chain. To keep our suppliers strong and protected against harm to this integrity, we have the mandatory Supplier Code of Conduct. We also offer our suppliers support with information, to improve the understanding of ethics, and the ways to prevent fraud.
Today we are providing you, our suppliers, with a new handbook on Ethics and Fraud. The new laws and enforcement programs I mentioned earlier are of interest to you, your executives and your legal advisors. The new handbook, however, is for everyone. Just like the Supplier Code of Conduct, the handbook contains essential information for you, your employees, your suppliers and your subcontractors.
Concurrently, Saudi Aramco is continually strengthening its systems for supply chain integrity, because the threats to that integrity are serious, and ever-evolving.
A key objective of our stronger system is greater financial profit for each stakeholder in the system.
But an even more fundamental goal of our continuing efforts is to magnify something that is priceless: trust. Practicing supply chain integrity not only “by the book,” but in our hearts, will help our firms improve the bottom line. But more important, it will elevate the spirit of personal integrity and community solidarity – something our rising generation needs even more than material wealth.
As our slides and posters say, business ethics is about doing the right things right.
Ladies and gentlemen, I hope you find our program today both interesting and informative, and I thank you for your kind attention.