In this episode, I visit with Don Stern, Managing Director of Corporate Monitoring & Consulting Services. We explore how to go about assessing ethics and compliance in the mergers and acquisition (M&A) context and the impact that M&A has on both the acquired entity and the acquirer. Stern began by noting the inherent risk in the entire M&A process. Yet, the culture perspective is not often considered in the pre-acquisition phase. Stern believes companies are making a big mistake in doing so. Companies spend huge amounts of resources to hire lawyers, investment bankers, accountants for the pre-acquisition phase. They scrub the financials, look at income and look at revenues and expenses. Yet they often spend almost no time in looking at issues like the ethical culture of the company to be acquired. Stern stated, “I’ve never quite understood that everyone understands the risk of any acquisition. That the company picture may not work out quite as rosy as was expected. They may be some synergies that were expected from an expense point of view that don’t quite work out.”
The lack of knowledge on each parties culture can lead to many problems in the post-acquisition phase. Stern emphasized that the key is to not only come in with a plan but to listen and be attentive while implementing the plan. This can lead to a standoff in accomplishing the integration steps required under the Foreign Corrupt Practices Act (FCPA) or similar legislation. However, this is the situation where an independent monitor can assist both parties. Even after closing, an independent integrity monitor can come in and help to smooth out the process. An independent third party comes in with credibility and experience which allows employees at the acquired entity to communicate their concerns in a way that really is very helpful to the acquiring company. Employees can communicate such basic issues as they do not understand the new training they are required to go through, how things do not seem to fit together or the most basic question of why they are now required to do something. Employees can explain why risk areas may exist in other places but not exist in some others. Someone who is truly independent, with no stake in the game, can help make those explanations in a non-threatening way. The key is that independent third-party expert.
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Welcome to the newest addition to the Compliance Podcast Network, Compliance and Coronavirus. In this episode, I discuss how Covid-19 has and will drive the digital transformation of compliance. When you look at some of the biggest influences on business going forward, digital transformation is one of the most positive during the age of Coronavirus. This has significant impact for the compliance professional going forward when you consider the questions posed by the Department of Justice in the 2020 Update to the Evaluation of Corporate Compliance Programs. For additional information on the digital transformation of business see the Fortune.com article, Why COVID-19 hasn’t stopped digital transformation at midsize companies
The building blocks of any compliance program lay the foundations for a best practices compliance program. For instance, in the lifecycle management of third-parties, most compliance practitioners understand the need for a business justification, questionnaire, due diligence, evaluation and compliance terms and conditions in contracts. However, as many companies mature in their compliance programs, the issue of third-party management becomes more important. It is also the one where the rubber meets the road of operationalizing compliance.
The key is to have a strategic approach to how you structure and manage your third-party relationships during the full lifecycle of the contract. This may mean more closely partnering with your third-parties to help manage the anti-corruption compliance risk. It would certainly lead towards enabling your company to manage the bribery and corruption risk while optimizing the performance of your third-parties.
Three key takeaways:
- Have a strategic approach to third-party risk management.
- Keep track of the financial stability of your third-parties.
- Rank third-parties based upon a variety of factors including compliance and business performance, length of relationship, benchmarking metrics and KPIs.
Welcome to the Great Women in Compliance Podcast, co-hosted by Lisa Fine and Mary Shirley.
As the Great Women in Compliance podcast continues looking at Black Lives Matter and how our professional community, we are so grateful to Jennifer Newton for joining Lisa. Jennifer is an attorney at GreenbergTraurig and focuses on banking and financial institutions on risk management and compliance matters. She is also one of the founders of the National Association of Black Compliance & Risk Management Professionals (NABCRMP), an organization that is starting out and is dedicated to networking, promotion and advancement of Black Risk Management Professionals.
She has spent her career in the financial and regulatory compliance world and has great insight on that area as a whole. We discuss the importance of diverse viewpoints, and also how the failure to do so can actually increase risk and issues for an organization as not all views are included at senior levels, and “in the room where it happens.” NABCRMP is intended to help increase the number of Black compliance professionals, build a community and network, and help with career development and growth.
She also provides some great insights about what is happening right now – both with corporate statements and with actions and next steps. And, we also discuss how allies and others, including the GWIC community can help to support Black E&C professionals and NABCRMP.
Join the Great Women in Compliance community on LinkedIn here.
Compliance into the Weeds is the only weekly podcast which takes a deep dive into a compliance related topic, literally going into the weeds to more fully explore a subject. In this episode Matt Kelly and Tom Fox take a look the recent enforcement action by New York banking regulators against Deutsche Bank, which resulted in a $150 million penalty for its business dealings with Jeffrey Epstein. The matter is full of corporate miss-steps, compliance failures, corporate governance disasters and presents a cautionary tale for every compliance professional.
Resources
See Matt’s blog post, Deutsche Bank’s Many Epstein Failures on Radical Compliance.
The Compliance Life details the journey to and in the role of a Chief Compliance Officer. How does one come to sit in the CCO chair? What are some of the skills a CCO needs to success navigate the compliance waters in any company? What are some of the top challenges CCOs have faced and how did they meet them? These questions and many others will be explored in this new podcast series. Over four episodes each month on The Compliance Life, I visit with one current or former CCO to explore their journey to the CCO chair. This month, my guest is Scott Sullivan, the Chief Integrity and Compliance Officer at Newmont Mining.
Scott Sullivan is a versatile and innovative governance, risk, compliance, ethics and legal executive with significant experience advising C-suite leaders and Boards of Directors in a global enterprise in a wide array of sensitive, high profile subject matter areas. He has extensive leadership in designing, implementing and enhancing world-class programs and favorably resolving regulatory crises for multinationals. He has managed ethics and compliance for a $5B global Fortune 500 corporation, directing a Business Integrity & Compliance function impacting 20,000 employees in over 55 countries with over 100 legal entities.
In this Episode 2, we explore how a CCO can stay in the front of the wolf pack and not fall behind. Our discussion includes, what are the internal signs, indicia or data a CCO should be looking at? Why does a CCO need a seat at the table to stay in front? And the external information you need to have from such diverse sources as the regulators, competitors, customers, suppliers and others.
In a 2015 speech before the SIFMA Compliance and Legal Society New York Regional Seminar, former Assistant Attorney General Leslie Caldwell for the first time, laid out metrics the DOJ would consider in evaluating a corporate compliance program around third-parties. Caldwell began with the following question, “Does the institution sensitize third-parties like vendors, agents or consultants to the company’s expectation that its partners are also serious about compliance?” This inquiry was brought forward into the DOJ’s 2017 Evaluation and all subsequent updates.
In addition to monitoring and oversight of your third-parties, you should periodically review the health of your third-party management program. The robustness of your program will go a long way towards preventing, detecting and remediating any compliance issue before it becomes a full-blown FCPA violation. As with all the steps laid out herein, you need to fully document the steps you have taken so that any regulator can test your metrics. Caldwell’s remarks around compliance metrics portended the Evaluation and what the DOJ will be reviewing and evaluating going forward, so it is clear what will be expected from your company’s compliance program. You should also use these metrics to conduct a self-assessment on the state of your compliance program.
Three key takeaways:
- It all starts with a Relationship Manager.
- Have company oversight of all third-parties.
- Audit, monitor, and remediate on an ongoing basis.
Welcome to the newest addition to the Compliance Podcast Network, Compliance and Coronavirus. In this episode, I visit Dr. Gleb Tsipursky, who is known as the Disaster Avoidance Expert. He has over 20 years of experience dramatically empowering leaders and organizations to avoid business disasters by addressing potential threats, maximizing unexpected opportunities, and resolving persistent personnel problems. Dr. Tsipursky is a bestselling author of several books, including on avoiding disasters in business.
Some of the highlights include:
- The top 3 questions Dr. Tsipursky is getting from clients now about business reopening in the era of Covid-19?
- What are some of the top challenges in the business reopening phase from a disaster avoidance perspective?
- What should business leaders be considering as we move into Q3 and Q4 of 2020?
- What is the risk profile of WFH and has it changed from a disaster avoidance perspective?
- How should a business think through the changes in its risk profile now?
For more information on Dr. Tsipursky, check out his website here.
Tom Fox welcomes Cody Rodriguez to this week’s episode of Innovation In Compliance. Cody is CEO of Iron Orchard, a small private oil and gas operator that continues to thrive even in the midst of a shutdown of the energy sector due to COVID-19. He and Tom discuss his company’s risk management approach and how it informs their corporate culture.
Determining Commercial Viability
Tom asks Cody how they determined that Iron Orchard was a commercially viable idea. Cody responds that they had about 100 meetings with CEOs and investors, seeking their advice before deciding to go ahead and launch Iron Orchard. Even then, they decided to use their own funds for the first investments. “We want to make sure, just like in everything else we’ve ever done, that we did it ourselves and risked our own dollars before we ever risk anybody else’s,” Cody explains. He describes how taking this approach led to increasing success as the company grew. People were willing to help them because of their humble approach. Cody says, “If you’re willing to tell them how you think you could be better and how you think you could improve from their advice, people are generally very willing and open.” Tom adds that humility is an incredible leadership skill.
Corporate Discipline and Culture
Tom comments that physical and financial discipline is a strategy that is embedded in Iron Orchard’s culture. “One of the biggest things that I learned was risk mitigation and capital discipline,” Cody responds. “For us, it’s never doing something that we can’t stand the risk of losing everything we just did. And if everything goes [wrong]… can we sustain ourselves?” He explains that every decision is made through collaboration and teamwork. These corporate values of discipline and collaboration are responsible for their survival and growth even in the midst of the pandemic. “If the assets can’t – even at the worst of times – support the team, then the team needs either to work a little harder, a little smarter to make sure that we can manage even through the most difficult times,” Cody says.
Resources
Iron-Orchard.com
info@iron-orchard.com
