Vanguard Magazine

26 JUNE/JULY 2025 www.vanguardcanada.com A N T I - C O R R U P T I O N erations and contracts. However, recent years have seen increased scrutiny from regulators, civil society, and media. The past five to 10 years have brought about substantial regulatory changes that have increased the demand for greater transparency and account- ability. As companies continue to do business in a continuously evolving competitive business environment, they face a complex regime of regulatory requirements and a myriad of pressures and risks. This new regulatory and business environment is placing even greater pressure on companies to strengthen their E&C and anti- corruption measures. Companies in the defence sector, both large multinational corporations and smaller enterprises, are now grap- pling with increasingly stringent procurement requirements, es- pecially considering high-profile scandals and headlines outlining ethical and governance failures. These scandals have significantly raised awareness of the risks associated with corrupt and unethi- cal practices, including the erosion of public trust and the heavy financial penalties that can follow. To navigate this complex envi- ronment, companies need an effective E&C program and culture anchored on a risk management mindset. In this new landscape, companies are expected to go beyond compliance and demonstrate a commitment to values-driven busi- ness conduct. According to the 2025 Ethisphere Ethics Premium, ethical companies significantly outperform their peers—showing a 7.8 per cent increase in long-term performance over five years. This premium highlights how strong E&C frameworks not only reduce risk but also enhance brand value, employee retention, and investor confidence. The Ethisphere Ethics premium highlights how E&C can not only help prevent, detect and mitigate risks but also can increase profitability, protect the brand and provide a competitive business advantage. Representatives of companies at CANSEC 2025 that I talked with agreed ethics and compliance are no longer simply a regula- tory checkbox. For most large players, E&C is reported to be fully embedded into their systems through robust training, targeted policies for high-risk markets, internal monitoring, and dedicated teams. These large firms recognize agility and resilience come from a culture that encourages ethical decision-making. Although real and tangible progress has been made in the past 10 years, recent headlines report ethical and compliance failures in the industry highlight the need for continuous monitoring and improvements. For smaller companies, the picture remains more fragmented. While many SMEs understand the importance of ethics, some still view E&C as a barrier to profit or an administrative burden rather than a strategic advantage. This mindset can delay program im- plementation, especially when resources are limited. Nonetheless, several SME representatives acknowledged strong E&C is now a condition for accessing supply chains of larger firms or meeting bid eligibility criteria in public procurement processes. Bridging this perception gap is critical for industry. Third-Party Risks and Supply Chain Challenges The modern defence sector is highly interconnected, with multiple tiers of suppliers, subcontractors, and agents operating across ju- risdictions. This complexity increases exposure to third-party risks, which are now considered among the most significant threats to organizational integrity. Ensuring third parties comply anti-cor- ruption measures and E&C requirements is more critical than ever. Regulatory bodies and investors expect companies to demon- strate proactive third-party risk management. The 2024 ACFE Re- port to the Nations revealed more than 50% of occupational fraud cases involved third-party relationships—highlighting the vulner- ability that can exist outside the organization's immediate control. Many defence firms, particularly multinationals, are responding by strengthening supplier onboarding processes, enhancing contractual clauses, and deploying automated monitoring systems. AI and data analytics play an expanding role, offering scalable solutions to de- tect anomalies, signal reputational red flags, and provide real-time risk scores. These tools are not just improving oversight—they're enabling continuous monitoring and proactive risk detection and mitigation. In a growing number of jurisdictions, companies that fail to implement such data driven risk management measures may find themselves exposed to financial penalties, reputational damage, or exclusion from critical government contracts. While the commit- ment to supply chain due diligence is not yet universal across the industry, the growing regulatory environment is forcing more com- panies to adapt stronger and more effective detection and monitor- ing processes. Artificial Intelligence and Its Role in E&C The integration of AI into compliance workflows is accelerating. In the defence industry, AI is being used to identify risk trends, perform real-time transaction screening, and streamline audits. Companies at CANSEC noted AI can reduce the burden on com- pliance teams by automating repetitive tasks and uncovering in- sights from vast data sets. • Global In-Service Support • Full Aircraft Life-Cycle Management • Innovative Engineering & Product Development • Flight Operations & Fleet Management Serving Canadian and International special mission customers from our 200,000 sq ft facility in North Bay, Ontario, Canada. Trusted Industrial and Technological Benefits (ITB) Partner. 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