The German Federal Office for Economic Affairs and Export Control (Bundesamt für Wirtschaft und Ausfuhrkontrolle – BAFA) published the Risk Analysis Practice Guide (the Guide) on August 17th, 2022 regarding the German Act on Corporate Due Diligence Obligations in Supply Chains (the Act), which has come into force as of January 2023 for companies over a certain scale.
Duties of BAFA, which is the official institution within the German Federal Ministry of Economy and Energy responsible for implementing the Act and supervising the compliance of companies and enterprises with the relevant obligations under the Act, include the following:
- Monitoring the level of compliance relevant companies and enterprises show with regards to their reporting obligations of human rights due diligence,
- Detection, elimination, and prevention of human rights violations,
- Implementation of penal sanctions for companies and enterprises that do not comply with the relevant obligations, and
- Developing and publishing guidelines to support companies and enterprises in meeting their due diligence obligations.
In this context, BAFA has published the Risk Analysis Practice Guide on the German Act on Corporate Due Diligence Obligations in Supply Chains to guide the implementation of human rights due diligence obligations. The Guide describes the legal requirements for the preparation and implementation of risk analysis in relation to the obligation to conduct regular risk analysis as enshrined in the Act. The Guide, which includes practical tips for implementation, includes the following titles and topics:
- Risk analysis as a basis for appropriate and effective risk management
- Basic requirements for risk analysis
- Objectives of risk analysis
- Issues to be considered in risk analysis Implementation of risk analysis
- Risk analysis preparation
- Steps in risk analysis and their results
In accordance with the Act, companies and enterprises should carry out an appropriate risk analysis to determine the risks related to human rights and the environment that may arise as a result of the activities of their own group companies and their direct and, in some circumstances, indirect suppliers, take measures and bring solutions to such risks and violations, and to do the necessary reporting.