Managing Compliance Risk in a Tight Economy

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					      Knowledge Leadership

     Managing Compliance Risk in a Tight Economy
     Ted Nunez, Ph.D., Director of Ethics and Corporate Responsibility
     Joel Rogers, Vice President Ethics, Compliance & Content Strategy at Kaplan EduNeering

             he costs of failing to identify and        A particularly instructive example is the   the board. Compliance programs have not
             mitigate legal and other risks can     ongoing crackdown on corrupt corporate          been spared (though decreases in compli-
             be high, yet nowadays professionals    practices. U.S.-based companies operating       ance budgets have not been as steep as
     responsible for compliance often are con-      overseas faced increased federal enforce-       many anticipated, and some companies
     strained by limited budgets in a tight econ-   ment of the Foreign Corrupt Practices           have allocated more money to this area).
     omy. In a complex and increasingly more        Act (FCPA) under the Bush administra-           The combination of tighter legal require-
     stringent regulatory environment, there’s      tion, and there’s every indication that the     ments and tighter budgets has forced
     often too much risk exposure and too few       Obama team led by Eric Holder at the DoJ        compliance officers to rethink processes
     resources to close the gap. The challenges     and Mary Schapiro at the SEC are pursu-         of risk assessment and mitigation with an
     are compounded for large organizations         ing FCPA investigations with even greater       eye toward becoming both more effective
     and global companies with multiple sites       vigor. Both the number of active cases and      and efficient in program design and re-
     of operation and diverse, transient work-      settlements are at record highs, as are lev-    source allocation.
     forces.                                        els of company fines and prosecutions of            Compliance professionals typically are
        What’s needed is a workable strategy        individuals. The DoJ has made clear that        tasked with managing delivery of train-
     and affordable tools for managing compli-      specific industries such as life sciences are   ing and certifications—in one form or
     ance risks across the enterprise. For many     under close scrutiny, while the SEC has         another—across the enterprise. For many
     companies, the most cost-effective way to      reorganized its enforcement group into          companies, the process requires multi-
     identify and mitigate a range of risks in-     special units, one of which focuses on cor-     language versions of compliance messaging
     volves leveraging the right technology and     porate fraud and corruption.                    and document delivery across the globe.
     automating the process. Before turning             For both companies and individuals,         Program managers that depend on manual
     to potential solutions, though, let’s take     several legal developments in the United        approaches to bread-and-butter compli-
     a closer look at some of the major chal-       States and the EU presage greater risks         ance functions such as the annual code of
     lenges facing compliance teams today.          of prosecution and more serious penalties       conduct certification or conflict of inter-
                                                    for non-compliance with anti-corruption         est disclosure can quickly find themselves
     The Regulatory Landscape                       rules are on the way. Currently there are       overwhelmed.
     Enforcement of both longstanding federal       companion bills in Congress that would              A growing number of compliance teams
     statutes and new laws is ramping up in the     provide whistleblower protection to em-         now recognize that managing compliance
Description: For both companies and individuals, several legal developments in the United States and the EU presage greater risks of prosecution and more serious penalties for non-compliance with anti-corruption rules are on the way. Currently there are companion bills in Congress that would provide whistleblower protection to employees who divulge credible, material information about FCPA violations to federal authorities. If enacted, this amendment to FCPA legislation could open the litigation floodgates.
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