On this day in 1901, Queen Victoria died, ending an era in which most of her British subjects know of no other monarch. She was born in 1819 and came to the throne after the death of her uncle, King William IV, in 1837. Her 63-year reign was the longest in British history. She oversaw the growth of the British Empire on which the sun never set. Queen Victoria restored dignity to the English monarchy and ensured its survival as a ceremonial political institution. She also brought a stability to the monarchy that has stayed with the country as well.
How can you bring stability to your compliance program? One of the most important steps that you can take is to regularly assess your risks through a risk assessment. I often hear some of the following questions posed by compliance practitioners regarding risk assessments: What should you put into your risk assessment? How should you plan it? What should be the scope of your risk assessment? These, and other, questions were explored in a recent article in the ACC Docket, entitled “Does the Hand Fit the Glove? Assessing Your Company’s Anti-Corruption Compliance Program” by a quartet of authors: Jonathan Drimmer, Vice President and Assistant General Counsel at Barrick Gold Corp.; Lauren Camilli, Director, Global Compliance Programs at CSC; Mauricio Almar, Latin American Regional Counsel at Halliburton; and Mara V.J. Senn, a partner at Arnold & Porter LLP.
The authors note that with all compliance programs, there is no ‘one-size-fits-all’ so your risk assessment should be tailored for your organization. In this article I will focus on the steps that you need to take leading up to the initiation of a risk assessment. The authors believe that the planning and layout of your risk assessment is a critical element for success by stating the importance of this issue cannot be over-estimated or over-emphasized.
To begin, the design of your risk assessment should be “guided by its scope and purpose.” So if this is your initial risk assessment to begin the implementation phase of a compliance program, one type of risk assessment may be needed. Conversely, if you have a mature compliance program, another type of risk assessment may be called for. If your company has moved into new or different geographic areas or has new product lines, it may require a different inquiry. The authors note, “knowing why you are conducting the assessment and what your goals are up front will make for a more efficient process and allow you to decide how in-depth your review should be.”
The authors next explore the gathering of information and developing a methodology for analyzing the results because “how you choose to gather information and what questions to ask will determine how useful your risk assessment will be for understanding your company’s risks and appropriately responding to them.” You will need to determine the number of employees to interview and who these interviewees should be for the risk assessment. While a questionnaire can be useful, you will need to consider in-person interviews as well. If it is difficult to make an initial identification of who should be interviewed, you can perform a preliminary assessment from a wider audience and then “streamline and tailor the in-person interviews.”
It is important to speak with employees who are generally considered to be ‘high-risk’ for Foreign Corrupt Practices Act (FCPA) purposes. This would include “people who interact with the government, either as customers or as regulators; those responsible for internal financial controls, such as accounting and finance functions; and senior management with the authority to make significant and impacting decisions, such as a primary executive in a local market.” It is also important to include those employees who are the prime interactors with third parties, both on the sales and supply side. This should include employees who have a role in the selection of such third parties for business relations and those employees involved in managing those relationships.
You will need to garner a sense of the company’s structure and goals. Additionally in FCPA enforcement actions and in the FCPA Guidance, the Department of Justice (DOJ) laid out several factors to take into account, such as “the country and industry sector, the business opportunity, potential business partners, level of involvement with governments, amount of government regulation, and oversight and exposure to customs and immigration in conducting business affairs.”
The authors end their section on risk assessment preparation by dividing the areas that they believe are most often visited into three categories: general corruption risks, specific commercial activity and existing corruption controls.
- General corruption risks – this category includes the corruption perception risk in the geographic areas where the company does business, directly or indirectly, through third parties. It also includes government touch points whether as a customer or regulator. Finally, it should include the corruption and bribery-related concerns of your business personnel.
- Specific commercial activities – this generally relates to third parties; how they are vetted, contracted with and managed. It also includes a review of travel, gifts, entertainment business courtesies, charitable donation and political contributions, mergers and acquisitions.
- Existing corruption controls – this area looks at not only financial controls such as monitoring and auditing but also training, employee incentives and hotline.
By laying out this risk assessment plan, you will have a good road map to think through not only how to work across a risk assessment but to begin to think how you can use it going forward. You will need to review and assess your highest risks first and then use that information to remediate any deficiencies going forward. I think what the DOJ wants to see is a well thought out plan for moving forward and forward movement toward the plan’s goal. These steps should help you in this journey.
This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at firstname.lastname@example.org.
© Thomas R. Fox, 2014