FCPA Compliance and Ethics Blog

May 29, 2015

Doing Compliance in an Economic Downturn, Part IV – Testing, Peer Groups and Talent Development

Edmund HillaryToday we celebrate the conquest of what the Tibetans call “Mother Goddess of the Land” and what the rest of us call Mount Everest. For on this date in 1953, Sir Edmund Hillary of New Zealand and Tenzing Norgay, a Nepalese Sherpa, became the first explorers to reach the summit of the highest point on earth. News of the success was rushed by runner from the expedition’s base camp to the radio post at Namche Bazar, and then sent by coded message to London, where Queen Elizabeth II learned of the achievement on June 1, the eve of her coronation. The next day, the news broke around the world. Later that year, Hillary and Norgay were both honored by the queen for their momentous achievement.

One of the things that made Hillary and Norgay’s ascent to the summit of Everest was the overall integration and teamwork of the entire group. The British team was led by Colonel John Hunt who set up a series of camps, allowing the expedition to push its way up the mountain in April and May. A new passage was forged through several previously un-surmounted obstacles to bring the team to about 26,000 feet. The first assault to the summit was launched on May 26 by Charles Evans and Tom Bourdillon, however they had to abandon their assent 300 feet from the top due to malfunctioning oxygen sets. Three days later, Hillary and Norgay were successful. In other words, teamwork and process were key to their success.

The accomplishment achieved by Hillary and Norgay drives the conclusion of my series on the steps you can take to improve your Foreign Corrupt Practices Act (FCPA) anti-corruption compliance program and overall compliance function during a period of economic downturn. So when faced with reduced monetary resources and lessened head count you might want to consider the teamwork of compliance. To that end you might use a strategy of developing compliance talent and relationships for the compliance function. You could initiate a compliance talent development group where you rotate high potential individuals in your company through the compliance function in some manner.

My suggestion would be to work with senior management and your Human Resources (HR) function to identify some of the key talent within your company. They can come from any other area of the company; such as accounting, finance, internal audit, HR itself, sales or any other discipline. From there you can task them to lead a working group on a compliance related project. The project itself can be any project you would like to try and implement when funding becomes more available.

One company I worked at had such an organization called the President’s Team which was an annual group that developed projects for the company Chief Executive Officer (CEO). The concept is the same but the goal is having the high talent employees learn more about compliance. Equally important for you as the compliance practitioner is to develop relationships with such up and comers so you can access to them if they continue to progress up the corporate chain. Remember it is important to have relationships with those in power and those who will be in power.

In addition to the talent development group, you should also revisit your interactions with your Board or Audit Committee. You need to re-emphasize to them their responsibility for compliance going forward and that it will not diminish simply because the price of oil has gone south or any other reason why you may be in an economic downturn. If there are emergency projects or others which you believe should take priority this would be a good time to inform and educate the Board on them so that you can continue to maintain as much funding as is possible. This could come into play if you have a number of whistleblower complaints to triage and review in short order due to employee layoffs. But if you did not establish those relationships ‘yesterday’, you probably cannot call on them ‘tomorrow’ so you need to make sure they are in place now.

Another idea that you can try is something along the lines of a client advisory committee or peer group review. You can put together a peer group to help advise your compliance function. After all, one of your constituent groups is your employee base. So why not turn to that group to find out what is working and perhaps their views on what is not, in their eyes, from the compliance function. If they can provide feedback to you on how to streamline a compliance process you might well be able to incorporate such suggestions going forward. They will be aware of the resource constraints the company is under so it could be an avenue which you have not previously used. Further, as with the talent development group concept, you would have the opportunity to develop relationships with other leaders in your organization. Finally, the group would have greater investment in the compliance function going forward.

Next is one of your highest risks, that of third parties, which most compliance practitioners recognize as their highest risk in any FCPA anti-corruption compliance program. This risk does not lessen simply because of a downturn. My suggestion is that you test and review all of the indicia around the lifecycle of your third party risk management program. This is not a forensic audit or even standards that an auditor might use. But you can test and you can test the documentation around your program at little to no cost.

The lifecycle of a third party is the following: (1) Business justification, (2) Questionnaire, (3) Due Diligence and Evaluation, (4) Contract negotiation, and (5) Managing the relationship thereafter. You can perform testing on all of these steps by reviewing the documentation in your third party database. For each third party you should confirm that there is documentation in each file, which supports each of the five prongs. In addition to the document, document, document aspect of this exercise, you can also use it as a cross-check on your internal control mapping for each validated prong so this can also be considered an internal compliance control.

I hope that you have found some of these ideas for improving your compliance function in an economic downturn useful. Perhaps they have stimulated ideas or discussions within your organizations going forward. If you have any other ideas which you would be willing to share, I hope that you will pass them along to me. We are all in this compliance ride together anything we all can do to move things forward is progress in my mind.

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 tfox@tfoxlaw.com.

© Thomas R. Fox, 2015

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