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18 August, 2022
Advancing Good Governance at Ukroboronprom

NAKO has effectively promoted good governance and public oversight of the state-owned defence enterprise, Ukroboronpom (UOP). 
Since 2017, NAKO has been advancing the implementation of the OECD corporate governance and anticorruption standards at the UOP. Due to NAKO's involvement, a Supervisory Board is now in place and the company is regularly undergoing an independent international financial audit. Ukroboronprom's financial audit for 2018-2019 was conducted in 2020, for the first time in its history. Earlier, NAKO helped develop terms of reference and tender documents for procuring auditor services, which later became the international company Baker Tilly. The results of this financial audit were published in early 2021. Simultaneously, Ukroboronprom has already announced a tender for independent audit services of its enterprises for 2020 and 2021, which indicates establishment of a positive new culture within the Concern. In addition, a forensic audit was conducted of Antonov state aviation enterprise, one of Ukroboronprom's largest companies. NAKO participated in developing the terms of reference for this audit. The results were passed on to law enforcement agencies.
In 2021, the key outcome of NAKO's work was the adoption by the Parliament of the law on Ukroboronprom's reform. The law will transform Ukroboronprom's state enterprises into more transparent companies (JSCs and LLCs) and introduce corporate governance in accordance with the best international standards. Further, after the law on corporatization was signed into force on October 6, in order to reduce corruption risks during the corporatization we plan to work on:
  • oversight over the process of selecting Supervisory Board members and the new JSC's key bodies;
  • introducing corporate governance standards in the new JSC's statute;
  • monitoring over moving property and assets during corporatization. 
The success of reforming the UOP lies in the proper and accountable implementation of the law. The international partners and the civil society should play a key role in this process.  
In parallel with supporting legislative work to implement corporate governance, NAKO assisted Ukroboronprom within the enterprise. Also, NAKO provided recommendations for adoption of the Code of Corporate Ethics, a document that defines the basic values, principles, rules of ethics, and business conduct of all Ukroboronprom employees. NAKO also contributed to changing procurement regulations for UOP companies. NAKO was representing TI DS in Ukraine in releasing the Defenсe Companies Anticorruption Index (DCI) 2019. The methodology of DCI helped us to study and evaluate the system of internal controls, anti-corruption policies, conflict of interest policies and organizational culture of the Ukrainian defenсe-related SOEs. 
As of now, Ukroboronprom is much more transparent and open to dialogue with experts and society. The selection of personnel for key positions in the Concern has also become more transparent. As part of the tradition started in 2019, NAKO has been participating in the UOP Nomination Committee, which selects directors for the defence companies in transparent competitions. During this time, NAKO took part in about 15 meetings of the Nomination Committee and analyzed more than 130 candidates for the positions of directors of Ukroboronprom's enterprises.