Integrity and compliance

Following the irregularities in the bid for the public transport contract in Limburg, an investigation was carried out at the request of the shareholder and the Supervisory Board on the effectiveness of internal procedures, risk management, compliance and internal control at NS (hereafter referred to as the GRC organisation). This investigation was carried out signed by Alvarez & Marsal and concerned all group divisions and operating companies within NS, both in the Netherlands and abroad.
In its findings, Alvarez & Marsal conclude: "The GRC organisation within NS is not yet in a sufficient state to prevent the risk of irregularities and unethical conduct to the maximum extent possible or to encourage desirable conduct. As a result, there is insufficient insight into integrity risks and an increased likelihood that integrity risks will not be properly managed. Systematic improvements are necessary in the areas of governance, risk management and compliance in order to gain more control over the issues of integrity and irregularity and reduce these risks."
In the report, the researchers at Alvarez & Marsal say that the investigation did not produce any signs of irregularities similar to ‘Limburg’. They did state that improvements were needed with regard to familiarity with internal rules and procedures and the development of a corporate culture in which colleague are better at holding one another to account for their conduct.

Measures in the NS Action Plan

Based on the recommendations made by Alvarez & Marsal, NS drew up the ‘NS Action Plan for Governance, Risk Management and Compliance’, which documents all the objectives and actions. The actions were tackled as a matter of urgency. NS has reported regularly to the shareholder and the Supervisory Board on progress in the implementation of the recommendations. In December 2016, NS sent the shareholder a letter giving substantive information on progress in implementing the Action Plan.

NS in control

In addition to the events in Limburg, the Parliamentary inquiry into Fyra and the desired level playing field (the process for translating the Competition Act and Railways Act into practice) also led to measures and recommendations. Given the overlap between the different processes, the programme office NS In Control was set up. NS In Control is responsible among other things for providing support and monitoring the cohesion in the implementation of more than one hundred measures from the above-mentioned Action Plan.
In the past year, NS has made significant progress in its transformation into a company that demonstrably, comfortably and credibly meets the standards in terms of governance, risk and compliance that are appropriate for a company of NS’s social position and responsibility. To achieve this, far-reaching changes were implemented in 2016 in the organisational structure based on the recalibrated strategy. This resulted in a new structure for the approach to GRC within NS.

Integrity Portal

In December 2016, NS launched the Integrity Portal for staff with queries about integrity. This portal also lets staff report integrity issues or abuses anonymously. Integrity and compliance are linked to the observance of policy and rules. That is why we use a number of instruments designed to help staff adopt the right behaviour, for example, to help with questions about which policy applies when and where, and where they can go for different kinds of questions, dilemmas or complaints. NS has also developed a company-wide e-learning tool on the code of conduct. All these measures, in combination with the new Integrity & Compliance department, are increasing employees’ familiarity with the rules, compliance officers and confidential advisers.
Another measure is the improvement of the screening process and supervision of the new screening policy. For instance, we have established new criteria for determining which jobs require screening. In the ‘Are you secure’ campaign, NS raised awareness among managers and staff about the need to keep information secure. There will be a follow-up to the campaign in 2017 for operational employees. We have also organised training sessions and awareness sessions to raise awareness about how to deal with information.

Three lines of defence

The appointment of a Chief Governance, Risk & Compliance Officer within the Executive Board means that GRC is embedded within the organisation at the most senior level. Within GRC, NS applies the ‘three lines of defence’ principle. The first line, the business units, bears primary responsibility for the identification and control of risks. The second line is formed by the Risk and Integrity & Compliance departments. They give support and advice to the first line but they also monitor and check that managers are fulfilling their responsibilities. The third line is formed by the internal audit department. It determines whether the processes and the system of internal measures are functioning properly such that the objectives can be realised in a controlled manner.

Culture programme

The conduct of a company’s employees and the choices they make are crucial to the integrity of a company. In 2017, NS will be starting an organisation-wide programme to encourage a culture of openness, holding one another to account and exemplary conduct throughout the organisation. We made preparations for this last year. From the autumn of 2016, we held talks with the management teams for the big business units with the aim of fostering awareness about integrity and the role of managers. In the sessions, we used examples of questions that employees had about the application of rules. We are incorporating these examples in the corporate culture programme so that other colleagues can learn from them.

A level playing field

NS occupies a special social and economic position in Dutch society. Fair competition takes top priority. Compliance with national and international legislation and regulations is important for this reason too. In our strategy, we stated that NS can only achieve this by cooperating with other carriers as a good partner. It is essential here that we prevent any conflicts of interest, or the appearance of a conflict of interests. We are doing this by comfortably meeting the requirements of the new Railways Act and Competition Act. This is our contribution to fair and open competitive relationships.
In close collaboration with ProRail, we have set up a portal in which we offer services and facilities to all carriers in the context of the Railways Act in a transparent and non-discriminatory manner. NS has designated single points of contact (SPOCs) for the various business units, where questions from other carriers can be dealt with carefully behind ‘Chinese walls’. Initial experiences and feedback from other carriers are positive and we are using this information to make further improvements.
In approximately 40 training sessions, more than 500 employees, including the Executive Board and senior managers, received training in the Railways Act and Competition Act from the Legal department and the SPOCs. NS has developed an e-learning module to keep that knowledge up to scratch. Furthermore, a setup has been designed for a structural training programme in the Railways Act and Competition Act.

Legal aftermath of the public transport tender in Limburg

Investigation by the Netherlands Authority for Consumers and Markets: violation of Railways Act

The Netherlands Authority for Consumers and Markets (ACM) concluded in 2015 after a complaint by Veolia that NS had violated the Railways Act in the tendering process in Limburg. The ACM rejected some elements of Veolia’s complaint. Veolia submitted an appeal against this. On 14 July 2016, the Trade and Industry Appeals Tribunal ruled against Veolia. No further appeal is possible against that ruling.

Inspection by the ACM: Section 24, Competition Act

In the summer of 2016, the ACM concluded its examination of the facts concerning violation by NS of the Competition Act, submitted its findings to NS and asked NS to give its views. NS did this. The ACM will now assess whether a violation of the Competition Act did take place and if so, whether a sanction will be imposed by means of a legal decision. An appeal against this ruling is possible.

Investigation by the Public Prosecution Service

The Public Prosecution Service (specifically, the Office for Financial, Economic and Environmental Offences in ’s-Hertogenbosch) started a criminal investigation in 2015 into possible criminal acts in connection with the tendering process for public transport in Limburg. A summons was served on NS and its Abellio subsidiaries. A pre-trial review was held on 13 December 2016. It is expected that the substantive proceedings will take place in the second half of 2017. An appeal against this ruling is possible.

Summons by Veolia

NS and five affiliated companies received a writ of summons from Veolia Transport Netherlands Holding BV and four affiliated companies on 22 July 2016 in relation to the tender in Limburg. Veolia is essentially submitting a number of claims in law that NS is liable for losses that Veolia alleges to have suffered in connection with the tender in Limburg. At this point, Veolia has not specified the claimed losses in detail.