Corruption in Egypt

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1 Presentation . Implementing ERM

description

Corruption in Egypt. Sample Project for Gb699. 2009 CPI Rank: 111 of 180 countries 2009 Score: 2.8 Previous ranking: 115 Compare to: United States rank and score: 19th, 7.5 New Zealand rank and score: 1st, 9.4. A history of vast corruption…. - PowerPoint PPT Presentation

Transcript of Corruption in Egypt

Page 1: Corruption in Egypt

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Presentation

. Implementing ERM

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COSO ERM Framework

Source: Committee of Sponsoring Organizations of the Treadway Commission www.coso.org. Used with permission.

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A COSO Implementation

Multinational Corporation ERM program:• 800 Business Risks. Consolidated into 20

categories:• 2100 Common Risks Group-wide

exposures.

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Subcontractors

Technical

partners

Suppliers

Information

Organization

Human resources

Customers

Operational processes R&D Marketing & SalesManufacturing

CompetitorsExternal environment

Internal environment

Business partners

Delayed production

Dependence on specific business

partners

Failures of sales channel

strategies

Failures of sales promotion

Inadequate business partner handling

Insufficient manufacturing reforms

and IT innovations

Internal infrastructure and

organization operations

Falling market prices

Failures to respond to changing

customer needs

Increasing competition

due to competitors' products

Structural reform-related issues

Naturaldisasters

Laws and regulations

Country-specific risks

Lack of differential technology

Delayedtechnologicaldevelopment

Delayed collaboration due to insufficient linkage between divisions

Cost increases (increasing inventory, soaring material costs, declining yield)

PL and quality issues

Staff allocation and development

Results of Business Risk Consolidation

- Business risks in the external environment, operational processes, and internal environment -

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Business StructureBusiness domain Business Domain Companies and Group Companies

Global and

Group Head Office

Global and

Group Head Office

Home appliances, household equipment, healthcare systemsHome appliances, household equipment, healthcare systems

LightingLighting

Environmental systemsEnvironmental systems

Home Appliances

Home Appliances

Matsushita Home Appliances Company, Matsushita Refrigeration Company*Healthcare Business CompanyLighting CompanyMatsushita Ecology Systems Co., Ltd.*

Matsushita Home Appliances Company, Matsushita Refrigeration Company*Healthcare Business CompanyLighting CompanyMatsushita Ecology Systems Co., Ltd.*

AVCAVC

Fixed-line communicationsFixed-line communications

Mobile communicationsMobile communications

Automotive electronicsAutomotive electronics

SystemsSystems

AVC Networks

AVC Networks

Panasonic AVC Networks Company

Panasonic Communications Co., Ltd.*

Panasonic Mobile Communications Co., Ltd.*

Panasonic Automotive Systems Company

Panasonic System Solutions Company

Panasonic Shikoku Electronics Co., Ltd.*

Panasonic AVC Networks Company

Panasonic Communications Co., Ltd.*

Panasonic Mobile Communications Co., Ltd.*

Panasonic Automotive Systems Company

Panasonic System Solutions Company

Panasonic Shikoku Electronics Co., Ltd.*

MotorsMotors

Electronic componentsElectronic components

SemiconductorsSemiconductors

Display devicesDisplay devices

BatteriesBatteriesComponents and DevicesComponents and Devices

Semiconductor Company

Matsushita Battery Industrial Co., Ltd.*

Panasonic Electronic Devices Co., Ltd.*

Motor Company

Others

Semiconductor Company

Matsushita Battery Industrial Co., Ltd.*

Panasonic Electronic Devices Co., Ltd.*

Motor Company

Others

FA, Corporate eNet Business DivisionFA, Corporate eNet Business DivisionSolutionsSolutions Panasonic Factory Solutions Co., Ltd.*, and othersPanasonic Factory Solutions Co., Ltd.*, and others

Victor Company of Japan, Ltd.*Victor Company of Japan, Ltd.*

Segment

JVCJVC

Matsushita Electric Works, Ltd.*, PanaHome Corporation*Matsushita Electric Works, Ltd.*, PanaHome Corporation*

Head Office

CISC

Panasonic Design

Company

R&D divisions

Sales division

Overseas divisions

MEW and PanaHomeMEW and PanaHome

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Secretariat

Results of Group-wide risk

assessment

Establishing and improving Group-wide RM systemInstructing risk assessment

After the Committee's establishment

After the Committee's establishment

Corporate FunctionalDivision A

Corporate FunctionalDivision A

Corporate FunctionalDivision C

Corporate FunctionalDivision C

Support

Support

Corporate FunctionalDivision B

Corporate FunctionalDivision B

G&G RM Committee G&G RM

Committee

<Roles of the Committee>

[1] Establishing and improving Group-wide RM system

[2] Conducting Group-wide risk assessment

[3] Reporting to the President, and Board of Corporate Auditors

[4] Studying possible measures to prepare for major risks; suggesting such measures to President and Corporate Functional Divisions

[5] Improving Group-wide support systems against emergencies

CommitteeCommittee

CommitteeCommittee

Domains

Subsidiaries

Corporate Regional Management

Divisions /Regional HQs

Collecting risk information from across the Group

Group-wide Risk Management System for General Control

(2) Establish a G&G Risk Management Committee to address the current problems

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3. Operations

2. Politics, economy, and society

1. Disasters and accidents

  (3) Information

Earthquakes, typhoons, tsunamis, floods, and other natural disasters

General Affairs Group, Overseas Security management Office

Fires, explosions, airplane crashes, terrorist attacks, and other major destructive or violent events

General Affairs Group, Corporate Personnel Group, Overseas Security Management Office

Wars, civil wars, conflicts, etc. General Affairs Group, Overseas Security Management Office

Corporate threats, abduction, and violent civil unrest

General Affairs Group, Overseas Security Management Office

PL and recall issues, other quality problems Corporate Quality Administration Division

Failure in complaint-handling Corporate CS Division

Intellectual property right infringements Corporate Intellectual Property Division

(2) Sales and procurement Violation of antitrust (competition laws) Corporate Legal Affairs Division

Bribery Corporate Legal Affairs Division

Violation of Subcontractors Act Corporate Procurement Division

Soaring raw material prices and unavailability Corporate Procurement Division

Trade secret leakage Corporate Information Security Division

Private data leakage and violation of privacy Corporate Information Security Division

Information security incidents related to products and services

Corporate Information Security Division

Insider trading General Affairs Group

Shutdown or malfunction of information systems and communication networks

General Affairs Group, Corporate Information Security Division

Unauthorized use of information systems General Affairs Group, Corporate Information Security Division

Inadequate security measures related to information systems

General Affairs Group, Corporate Information Security Division

(4) Information systems

Environmental pollution Corporate Environmental Affairs Group

Waste treatment Corporate Environmental Affairs Group

Environmental regulations Corporate Environmental Affairs Group

(5) Environment

Violation of security export control Corporate Legal Affairs Division

Trade issues Corporate Legal Affairs Division

  (6) International relations

(7) Finance Bad loans and business partner bankruptcy Corporate Accounting Group

Tax and accounting system changes Corporate Accounting Group

Exchange rate fluctuations Corporate Finance & IR Group

Interest fluctuations Corporate Finance & IR Group

Stock price fluctuations Corporate Finance & IR Group

Impairment of long-term assets and deferred tax assets

Corporate Accounting Group

(8) Labor issues Human rights issues, including sexual harassment

Industrial Relations Group, Corporate Personnel Group, Overseas Security Management Office

Employment Corporate Personnel Group, Industrial Relations Group

Industrial accidents Industrial Relations Group

Health issues such as infectious diseases Industrial Relations Group, Overseas Security Management Office

(1) Quality, CS, and intellectual property

Clarify Sections Responsible for Each Risk

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Corruption in Egypt

Sample Project for Gb699

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2009 CPI Rank: 111 of 180 countries2009 Score: 2.8Previous ranking: 115

Compare to:United States rank and score: 19th, 7.5New Zealand rank and score: 1st, 9.4

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A history of vast corruption…In 2008, the United Nations published the Egypt Human Development Report.

The results called on the civil society to act as a “third pillar” in developing the country as they have been failed by both public and private administrations.

As a result of the vast corruption, Egypt’s development has remained stagnant while the disparity between the wealthy and poor has increased.

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The World Bank says that poverty in the 2004-2005 years is equivalent to that of 1995-1996.

CPI dropped from 70th to 105th from 2006 to 2007.

New York Times: 45 percent of Egypt’s population survives on < $2 per day.

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The Corruption of Bread

Bread, sugar and tea have been subsidized since WWII.

Provisions are the most corrupt sector in Egypt.

$2.74 billion spent on subsidies -more than on healthcare, education

Creates significant black market value.

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As a result…

Government sells flour $1.50 per sack for a profit of $10 per sack.

An inspector must certify that the baker has used flour properly for 3 months in order for baker to receive $1/sack refund.

Inspector is bribed by baker with black market sales and inflated prices.

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In a study by the Al Ahram Center for Strategic Studies, 28.5 percent of respondents attribute inflation and increased prices caused by corruption.

88 percent blame it on low wages.

After 20 years, the bakery inspector makes $55 per month to feed a family of ten.

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"The state-businessmen relations in Egypt are an

illegal and unconstitutional marriage.”

Abdel Khaleq Farouk, economist

L.A. Times, March 1, 2009

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Business Anti-Corruption Snapshot

Executing a commercial contract requires and average of 42 procedures and takes 1,010 days.

It takes 6 years to settle business dispute in court. (Heritage Foundation, 2009)

Corrupt police officials will buy shops and properties off of detainees.

7.3 percent of annual sales spent on bribing officials.

No tenure for low level judiciary. Wages low and bonuses contingent on higher levels.

Environmental ministry is lowest paid and has most high-level scandals in 5 years, with 10.

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2006 Ferry Disaster

1,035 people are killed when the ferry catches fire and sinks in the Red Sea.

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Recovered bodies are put in unlabeled garbage bags. Only riot police are sent to assist concerned family members.

An investigation finds that the ferry owner, Mamdou Ismail,a parliament employees is related to the owner of Egypt’s safety inspection company.

The 600 page report indicates incompetence by authorities and neglect by the ferry owner. He flees to London and is acquitted.

The incident symbolizes Egypt’s corruption.

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A Corrupt Education..

“What remains is a decomposed corpse that yields nothing worthy of meaning and to the stench of which we have become thoroughly desensitized.”

Al Ahram, June 25, 2008 editorial

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A Cycle of Poor Regulation:

-June 2008: Daughter of Egyptian parliament member accused of selling national exams that are essential to determine college enrollment.

Lack of proper oversight leads to an exam riddled with errors, impossibly difficult questions.

Suicide is common for students that fail the exams. Students that pass can incur debt for private tutoring they need because of poor schools. Overcharging tutors are the same professors.

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Babies Killed in Power Outage

July 2008: 4 babies die when a hospital loses power for 3 hours and the generator fails.

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Outrage spreads in Egypt when a mobile phone captures doctors trying to resuscitate 5 infants at a hospital without power.

Healthcare and education are free in Egypt, however, public spending has been cut. In 2001, national spending was 2.4 percent, in 2006, 1.3 percent. Egypt has seen 7 percent economic growth, yet most goes to wealthy.

Doctors are paid $47 per month.

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Optimism for future?

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Transparency on the horizon.. Transparency is improving with rise in Internet popularity.

Egypt uses 2nd most Internet in Africa (8.6 million users).

40 percent of population between ages 15 and 40.

USAID-funded Nazaha website to raise awareness by reporting corruption from 23 sources.

Egypt signed UN Convention against corruption.

51% believe democracy will help.

Established 4 councils: Committee of Integrity and Transparency, Administrative Authority Council, Central Auditing Agency, Public Funds Prosecution, Administrative Prosecution Authority.

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Sources

New York Times New York Sun

Times L.A. Times Reuters BBC Transparency

International

Business Anti-Corruption Portal

PoliticsOnline Al-Ahram