Responding to a modern slavery incident

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Responding to a modern slavery incident should in some ways be no different from responding to any serious incident that affects your business.

 

Ideally, a modern slavery incident response plan will align with any broader incident response and management plan that an entity has. Specific actions dedicated to dealing with modern slavery can be added to the broader plan.

 

Dealing with a modern slavery incident can be complex and time-consuming. As with any crisis or incident, the more that has been prepared for ahead of time, the better the entity will be placed to address the incident and minimise adverse consequences.

As the Commonwealth Modern Slavery Act 2018: Guidance for Reporting Entities observes entities will be able to respond more effectively if they have a pre-agreed process or policy in place to guide its actions.

 

The risks of a modern slavery incident to an entity

 

Consider the following risks that a modern slavery incident poses to a business:

 
Risks of modern slavery incidents.png
 

  1. Reputational risk: a modern slavery incident could take the form of a serious breach of labour standards identified at a key supplier. These breaches can sometimes be shocking, involving deaths, grave personal injuries to workers or inhumane living and employment conditions. Media reporting invites scrutiny from investors and the public. Questions may be asked by the investor community, large customers including government institutions, and the community.

  2. Financial risk: One negative incident can have serious flow-on effects: the damage to business reputation can lead to decreased sales, smaller market share and a lower share price and threaten access to capital. Penalties and associated costs like legal fees may become payable if products affected by modern slavery are seized by border officials. Depending on its link to the incident, the entity may need to consider remediation to victims. Insurers may need to be informed, affecting future premiums. Customers may terminate contracts if so entitled or exercise other rights and remedies.

  3. Operational risk: Due to the high-profile nature of modern slavery incidents, properly responding to them can consume significant management time. Executives up to the CEO and the Chairman need to be prepared to respond to investor and media inquiries. Operational, legal, compliance, procurement, investor relations and corporate affairs teams should be involved in the effort to investigate, understand and remediate the incident and communicate to stakeholders. All teams must be coordinated to deliver a consistent, accurate, achievable and compliant message. Supply chains meanwhile can suffer severe interruption if supplier sites are shut down or investigated, or if products are seized. As the entity deals with the fallout, employees can become demoralised and disengaged.

  4. Compliance risk: Modern slavery reporting laws may require that the incident be properly investigated so that the entity can disclose it in a modern slavery statement, with the actions taken to remedy the situation. The incident may need disclosure to the stock exchange in the case of a listed entity. Directors should consider if they have discharged their duties to act with care and diligence and in the best interests of the entity. Statutory licences that carry ethically or socially responsible conditions may be at risk.

What goes into a response plan?

 

Because of the myriad of risks that a modern slavery incident carries, a reliable response plan should allow for quick, efficient and effective action. It should address at least the following:

 

  1. The entity’s position on human rights abuses and modern slavery practices, any areas of zero tolerance and its general approach to managing incidents, which should be victim-centred.

  2. The initial response pathway and requirements, which should clarify that employees must not manage the incident themselves, but escalate it to a responsible lead or leads. It should identify the responsible leads, what steps must be taken in the critical first few hours and days when the entity is alerted to the incident, which contacts should be cascaded to and what records must be kept.

  3. The communications management approach, which should align with or refer to the entity’s existing communications responsibilities. It should identify who is responsible for dealing with key stakeholders, such as investors, customers and the media.

  4. The remediation framework, including the approach towards assisting the victim and dealing with the relevant supplier or suppliers in the supply chain.

  5. A compliance checklist, including persons who must be notified to ensure the incident does not trigger wider compliance breaches, for example relating to continuous disclosure, insurance, regulatory affairs, contracts and financial covenants.

  6. The persons, roles and teams in the entity who will need to be involved in responding to, investigating, managing and communicating the incident.

  7. An organisational chart to show the responsibilities to management, executive leadership, board committees and the board, as appropriate.

  8. Other policies of the entity affected by the incident response plan.

  9. Who is responsible for reviewing, amending and approving the plan, and how often.

 

In addition to advising on many modern slavery policies and modern slavery incident response plans, I have counselled clients on how to respond to critical modern slavery incidents in real-time. Each client’s needs will be uniquely different depending on their industry, regulatory context, market position, supply chains, customer base and management approach, but a few sound principles prepared ahead of time can make all the difference should the worst happen

4 November 2020

 

For more information on this article, please contact Geraldine Johns-Putra.

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Principal Lawyer, Geraldine Grace

Email: geraldine[at]geraldinegrace.com.au

Tel:    61 (0) 411 183 968