Petrofac 'draws a line' under £77 million fine
It's a new month for the oil and gas industry - and Petrofac is hoping it's the start of a new corporate chapter.
On Friday it was slapped with a £77 million fine at Southwark Crown Court in relation to seven charges of failing to prevent bribery in the Middle East, concluding the Serious Fraud Office's investigation into the company.
The penalty includes a confiscation order of £22.8 million payable by January 3 2022; £47.2 million payable on February 14 2022; and the Serious Fraud Office’s costs of £7 million payable on the same date.
Chairman René Médori said it "draws a line" under a regrettable period of its history.
"We have taken responsibility, reformed and learned from these past mistakes, as acknowledged by the SFO and the Court. Most importantly, the extensive work that we have done since the SFO investigation began means that the Petrofac of today has a comprehensive compliance and governance regime that meets or exceeds international best practice. The past behaviour uncovered by the SFO would not be possible today, and we look to the future a better and more focused company, well positioned to capitalise on the opportunities we see before us.”
Group Chief Executive Sami Iskander said it is now in a position to put the matter behind it.
"This part of our history does not represent the Petrofac of today – a company that as its new CEO I am proud to lead, and which operates upon the core principle of ethical business conduct, supported by a comprehensive governance regime. We have refined our best-in-class delivery capabilities, restructured the business around technical excellence, re-focused on our customers, hired new talent, and further sharpened our cost-competitiveness.
“We emerge from this cloud as the world needs more energy – both traditional energies that can be produced in the most efficient manner, and renewable energies on which a lower carbon world can be built. Petrofac is well positioned to support both, with the capabilities, experience, and expertise to deliver for our expanding customer needs. Our markets in both traditional and new energies are growing and we have a clear path to rebuild our business with a differentiated customer proposition that sets us apart.”
Petrofac said in determining the penalty, the Court and the Serious Fraud Office acknowledged its corporate reform through its "transformation of the company’s leadership, personnel, compliance and assurance processes".
The company will need to keep a close eye on its processes as it begins rebuilding its corporate reputation.
Companies must build their own internal competence and develop a robust culture to withstand the inevitable pressures when they arise. In a column for McKinsey, Ravi Venkatesan, a former chairman of Microsoft India and Cummins India, outlines four key priorities:
Don’t ignore the basics
Companies need to ensure that basic controls are in place on a range of issues. For example, too few foreign companies pay adequate attention to compliance.
Invest in the key functions
Many companies manage head count very tightly and underinvest in staffing compliance functions such as finance, internal audit, and legal.
Clear policies, procedures with approval processes and stringent controls, and regular internal audits of high-risk areas are all necessary measures - but what really matters is strong local leadership in the matter of compliance.
Be prepared to tough it out
Success is perfectly possible in emerging markets without making compromises, but there are real consequences and real costs for those who uphold ethical behaviour, especially in the short term. Some business may be lost, budgets may be missed, approvals may take more time, and officials may respond angrily.