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The following discussion concerns UPS’s strategy, processes, and progress in preventing corruption and anti-competitive behavior and ensuring full compliance with law and regulation. In other sections of this Report, you can read about our governance programs (see Appendix A), environmental compliance (see “Environment,”), and workplace safety (see “Workplace,”). 


Global Compliance Process 


UPS invests significant resources to address issues related to compliance, corruption, and anti-competitive behavior. This is due primarily to our fundamental commitment to operating responsibly and sustainably. We also recognize that our rapid international expansion is bringing us into contact with a growing number of suppliers, subcontractors, agents, partners, and third-party relationships around the world. We understand that business people in different countries may hold varying views of acceptable business behavior. We do not allow these facts to change our commitment to systematically establishing and enforcing high standards for responsible behavior in all our business relationships. As a result, UPS conducts an appropriate level of diligence before entering into new business relationships to ensure that its commitment to compliance will be upheld. To further that commitment, UPS conducts regular reviews with its business representatives as a further check against compliance risks. 

Internally, we have developed a five-step process to ensure measurable compliance effectiveness in all our international package, freight, and distribution business entities, and we actively implement it. This process is depicted in the right column. It is the responsibility of the UPS global compliance team to facilitate effective processes and behaviors in our operating units, which starts with identifying and taking ownership of risks and then documenting processes and procedures to address those risks. Our compliance team then works with our internal learning and development department to create effective training programs, and with business unit managers to implement the processes, procedures, and training programs. The global compliance team continually monitors data streams and other information sources that our compliance processes and procedures generate. The focus of this monitoring is to audit and improve our compliance systems and behavior both locally and internationally. 

Risk Analysis and Training 


Beyond initial training required of all employees (which differs in complexity based upon an employee’s specific job requirements), we analyze all our business units for risks related to corruption. This annual analysis is accomplished by requiring selected managers and specialists to complete a detailed ethics and compliance survey designed to identify events, situations, or relationships that could lead to risks related to corrupt or anti-competitive behavior. In addition, we regularly review the UPS Code of Business Conduct with our employees; the Code emphasizes our strict policies on anti-corruption. Beyond regular training programs, we conduct a comprehensive focused training on ethics and compliance with a goal of training 100 percent of full-time managers and specialists every two years. 

In 2012, we continued to revise and update our risk assessments to more proactively seek out evidence of corrupt or anti-competitive practices. We typically conduct these audits in a number of countries each year, selecting them based on the expansion of our business, the resources of our compliance organization, and other strategic factors. We pay particular attention to significant changes in a business entity that can result from, or create pressure for, corrupt or unethical practices. In 2012, we conducted risk assessments in 148 countries. We conducted 40 audits for the purpose of assessing risks related to corruption, including 15 corruption-specific audits. These audits included businesses with which we have both direct and third-party relationships.  

Information pertaining to such matters is reviewed and acted on promptly by senior management, up to and including the Management Committee. Organizational responsibility for our business conduct and compliance policies, as described previously, rests with Teri McClure, Senior Vice President of Legal, Compliance & Public Affairs, General Counsel and Corporate Secretary, along with the Nominating and Corporate Governance Committee of the Board of Directors. Additionally, the UPS Audit Committee is responsible for overseeing the company’s compliance obligations related to accounting and financial reporting. Our Code of Business Conduct is available online in the Investor section of our website. 


Corruption 


Our policy is to comply with all applicable laws, rules and regulations in all countries where we operate. Our Code of Business Conduct states policies and procedures that prohibit UPS employees, and the people acting on our behalf, from engaging in unlawful activities, including violations of the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act, and other applicable anti-bribery laws, rules and regulations in various countries. We are not aware of any allegations of corruption in 2012 from any government agency round the world responsible for oversight of this issue. 


Anti-competitive Behavior 


Our policy is to comply with all applicable laws, rules and regulations, in all countries where we operate. The UPS Code of Business Conduct includes policies and procedures that prohibit UPS employees, and the people acting on our behalf, from engaging in anti-competitive behavior, antitrust activities, or monopolistic practices. 


Compliance 


Our policy is to comply with all applicable laws, rules and regulations, in all countries where we operate. The UPS Code of Business Conduct includes policies and procedures that prohibit UPS employees, and the people acting on our behalf, from engaging in unlawful activities, including violations of the U.S. Foreign Corrupt Practices Act and other applicable anti-bribery laws, rules and regulations in various countries. On occasion, UPS resolves routine civil administrative matters and associated penalties when they arise. We are not aware of any breaches of compliance in 2012 that are material to our operations or penalties that are material to company assets.