Bain & Company's Response to SARS
Public Sector Risk
Public Sector Risk
Our new risk framework and protocols to prevent the missteps of SARS from happening again.
Public Sector companies are often subject to intense scrutiny from the media and the public as a whole. Voters, taxpayers, activists, and concerned citizens all feel, and rightly so, that they have a stake in the success or failure of a Public Sector organization. As a result, any work Bain does in this area has the potential to garner elevated levels of attention and criticism. The risk assessment process exists to reduce the chances of that happening and mitigate the impact if it does.
Why We Assess Public Sector Projects
Why We Assess Public Sector Projects
Before submitting a proposal for any project in this sector, we run a risk assessment to understand and address any sensitive issues, pitfalls, or conflicts of interest. At the heart of the process is a conversation with the local account team with the purpose of:
- Creating awareness among the local Leadership Team for best practices and inform them about potential risks/ common watch-outs
- Putting in place agreed actions to safeguard against risks (e.g. documenting interactions, requesting a written agreement on scope)
- Halting any projects that could jeopardize the integrity of the firm
- Providing the Board with a comprehensive overview of Bain's risk landscape to allow for better planning
Types of Public Sector Clients
Types of Public Sector Clients
A case is subject to a Public Sector risk assessment if the client matches one of the criteria defined below:
State-Owned Enterprises
A state-owned enterprise is defined as any business where the government owns more than 25% of the equity or where the government exerts control over the company through a golden share or influential positions on the company's board
Government Institutions
The criteria for government institutions are broadly defined and include departments, divisions, offices, agencies, regulators, and ministries
State-Owned Investment Funds
This includes any fund which manages money from a country's reserves or taxpayer savings; normally this means sovereign wealth funds or pension funds
Not-For-Profits in an area of Public Interest
Not all non-profits are subject to Bain's risk criteria, but when they operate in an area of public interest, with a role similar to that of a government institution then they have to go through the same risk reviews. This could be sectors such as social services, health, education, development, or the environment
High-Risk Relationships & Practices
High-Risk Relationships & Practices
Persons of Public Interest (PPIs) are individuals whose decisions and behavior could pose a reputational risk when interacting with Bain. There are three types of PPIs:
Mixed/poor public reputation
- Any person working in a target or active Public Sector client with a mixed/poor public reputation (we do not distinguish between deserved and undeserved)
- Individuals working in a target or active public sector client whose sources of wealth are unclear
Tracking level: Record every interaction
Political prominence
- Any person with prominence who owes their position within an entity more to their political affiliation than their demonstrated competence
- 1st and 2nd-degree relatives of such individuals (in countries with a high Corruption Perceptions Index score)
Tracking level: Moderate
Bain alumni; family & friends of employees
- Any person who falls in the group of Bain alumni, now working at a target or active Public Sector client
- A family member or friend of a current Bain employee working at a target or active Public Sector client
Tracking level: Minimum
Politically Exposed Persons (PEPs) are technically a subset of PPIs but they are separated out, because of heightened importance. PEPs are individuals that are subject to sanctions levied by a national government. In addition to the more severe reputational risk posed by these actors, Bain is potentially subject to a compliance risk when dealing with them. It is rare for us to come across them, but when we do, every interaction must be tracked.
Public Sector Risk Assessment Process
Public Sector Risk Assessment Process
Our standardized risk assessment process is divided into three parts: Country Risk Assessment, Client Risk Assessment, and Opportunity Risk Assessment.
All risk assessments are conducted with either the Global or the Local Risk Team prior to proposal submission and are documented in Bain's Online Risk Register.
The Country Risk Assessments are designed to provide a summarized overview of the current market context across a number of relevant dimensions and point out certain risks or important developments in a given country.
Country Risk Assessments use external indices and credit ratings to assess the current environment of a given country.
- Corruption Perception
- Democracy Index
- World Press Freedom
- Inequality-adjusted Human Development Index
- Environmental Performance Index
- Global Rights Index
- Credit Ratings
The Client Risk Assessment focuses on the Public Sector client that Bain wants to engage with and provides a broad overview of all the risks Bain could encounter when working with the respective client. In the assessment, we discuss the areas 'Nature of Client', 'Client Reputation' and 'Potential for Success'.
In order to gauge how strong public interest is for the client organization itself, its line of work or its overall governance, we assess the 'Nature of Client'. We identify potential PPIs/PEPs in the client organization that Bain may be working with and discuss the 'Client Reputation' of the overall entity and key individuals.
We also estimate the 'Potential for Success' by analyzing whether the client has a proven track record of transforming or implementing change successfully and by evaluating the overall experience that Bain has had with the client in previous projects.
The Opportunity Risk Assessment focuses on the individual project that Bain wants to work on with the client. It provides an overview of risks and problems that could arise before, during and after the work and includes possible actions to mitigate the risks.
As a final step, we assess the project at hand to understand what kind of work Bain would be doing and to identify possible areas of higher public interest or media scrutiny (e.g. headcount reduction) in addition to making sure that the scope of work is clear.
We evaluate the bidding and procurement process to identify any risks that could arise if for example the work was single-sourced or won through a Bain alumnus. In the assessment, we also make sure that we can rely on the capabilities of our client counterparts and that we can trust that our work will be used appropriately.
We ensure that we have the capacity to deliver and are aware of any risks associated with third parties. Furthermore, we analyze the worst-case risk exposure for the scenario that we cannot deliver appropriately or the client cannot transform as expected to assess whether this could have consequences that go beyond Bain's relationship with the client.
In case any risks are identified, we agree on adequate mitigation actions with the Risk Guardian of the project who will ensure that the actions are in place and followed throughout the work with the client.
An essential pre-requisite for opportunity risk assessments to take place is effective pipeline management, i.e. timely flagging of Public Sector or Public Interest opportunities in the pipeline prior to submitting a proposal.
All risk assessments are conducted with either the Global or the Local Risk Team prior to proposal submission and are documented in Bain's Online Risk Register.
Guidelines for Public Sector Work
Guidelines for Public Sector Work
In addition to the Public Sector risk assessment, every case team member working on a Public Sector case has to complete an online training followed by a short test to be certified for PS work. The foundation of the training are our 'Guidelines for Public Sector Work'.
- Undertake a risk review of all potential opportunities, including investment and pro bono work
- Appoint a Risk Guardian, accountable to ensure follow through on risk actions, sustain an ongoing risk dialogue, on-board team members, and keep the Risk Register up to date
- Identify all potentially high risk relationships (PPIs* and PEPs*) and adopt best practices: record all substantive interactions; ideally have at least two Bain employees at each key interaction; no PEP contact without prior CRO approval
- Exercise extreme caution in helping any individual in their candidacy for a Public Sector role
- Avoid using advisors to gain access/win work; undertake rigorous due diligence before contracting with third parties to help deliver work; avoid taking accountability for the deliverables from sub-contractors where we lack the skills/qualifications to assure their output (involve legal and TSG in onboarding 3rd parties)
- Know your clients’ procurement rules: raise a red flag at any concern whether they are following their own rules. Exercise particular caution when sole sourcing
- Ensure legal sign off (expert in local law) of any and all contracts with Public Sector clients as well as understanding of client entity and structure to confirm sources of funding for our work
- Ensure robust meetings/sources/document trail is in place and archive to Bain best practice standards
- In case of any concerns, please consult with your direct supervisor and/or HR. Concerns can also be raised via the True North Line platform where your anonymity as a reporter will be guaranteed
Public Sector Accreditation
Public Sector Accreditation
In order to accelerate risk assessments for Public Sector opportunities and increase sensitivity for this line of work across the Bain system, we accredit local teams or offices to manage the risks associated with PS work. It allows the accredited teams or offices to run Public Sector assessments on their own, for opportunities that develop in their markets. The Global Risk team audits/validates the accredited offices and accounts on a regular basis.
True North Line
True North Line
At Bain, we’re guided by our True North – our unwavering and shared commitment to always do the right thing by our clients, our people and our communities. We share the responsibility of abiding by our Global Code of Conduct, and speaking up when we suspect wrongdoing, danger or risk affecting our peers, the firm or our clients.
We encourage our employees to direct questions or concerns to their manager or local HR department whenever they feel comfortable doing so. We realize, of course, that this may not be possible in every situation. For such cases, we’ve launched the True North Line – Bain’s global, confidential reporting line provided by Business Keeper, a market-leading provider of compliance systems. The True North Line guarantees strict anonymity through the reporting process, in line with local laws. All reports are taken seriously and will prompt further investigation.