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Compliance Into the Weeds

Suicide Prevention Hotline and a Speak Up Culture

Compliance into the Weeds is the only weekly podcast that takes a deep dive into a compliance-related topic, literally going into the weeds to more fully explore a subject. In this episode, we look at the implementation of a national suicide prevention hotline, 988, and consider what it might teach compliance professionals. Highlights and questions posed include:

·      What is the new national Suicide Prevention hotline?

·      How does it inform your corporate hotline and speak up culture?

·      How do you teach the trait of listening?

·      Engaged employees are more effective employees.

·      How easy are the mechanics of your hotline to navigate?

Resources

Matt in Radical Compliance

Categories
Blog

Supply Chain and ESG-What You Need to Know: UFLPA, Supply Chains and ESG

I recently had the opportunity to visit with several folks from Assent Inc. for a sponsored podcast series entitled Supply Chain and ESG – What You Need to Know. We discussed: ESG drivers with Jared Connors and James Calder; UFLPA, Supply Chain and ESG with Travis Miller and Jamie Wallisch; the New World of Product Compliance and ESG, with Cally Edgren and Devin O’Herron; Emissions Reporting Strategies with Devin O’Herron and Jared Connors; and Responsible Minerals, Supply Chain and ESG, with Jared Connors and Daniel Zamora. Today we review the intersection of the Uyghur Forced Labor Prevention Act (UFLPA), Supply Chains and ESG.

The UFLPA is a law which targets goods made, whole or in part, by forced labor in the China Jing Jang region or made by forced labor in other parts of China by Uighurs, or other minorities. Wallisch explained that it is designed to operate as a de facto trade ban on goods from the Jing Jang region of China. US businesses will face the high burden needed to overcome an expectation of forced labor presumption. Wallisch believes this is the most “significant law placed around the issue of forced labor, and it has the most tangible and concrete terms of repercussions, that companies can potentially face.” Further, she believes the key will be around your documentation to provide to US Customs and Border Protection. Miller noted that this means if you are “asking companies to look back into where the actual sand came from, that got turned into the silica, that got turned into the semiconductor, that got turned into the circuit board, that got turned into the device that finds its way into your laptop. There’s just never been anything like it.”

Interestingly, this ties directly into a company’s overall ESG framework as it is combining all elements in such a program. When you tie the UFLPA, together with anti-corruption laws such as the Foreign Corrupt Practices Act (FCPA), export controls laws and regulations enacted by both the Trump and Biden Administrations and anti-money laundering (AML) laws, such as the AML Law of 2020, you begin to see a more integrated approach by the government and how companies must respond with an integrated approach such as a corporate ESG program. Wallisch concluded, “it’s really signaling the intersectionality of all these particular topics under ESG.”

Miller noted, interestingly, about how much this law and its guidance weave together existing business processes. He believes the UFLPA was “birthed out of the America Supply Chain Executive Order in the US/China trade war, which was focused on semiconductors, critical, raw materials elements that are the subject of the extractives. To comply with it, you could not actually start unless you already had a product compliance program in place. This means that if you do not know the bill of materials, if you do not have an approved vendor list, if you do not know where your components are being manufactured; how do you even begin the ESG program? So really in my opinion, the UFLPA is not novel in that it created something new; it is  novel in that it is forcing companies to use all the existing business processes to tie back the breadcrumbs and figure out things that they should already know and then to be responsible for reporting on them.”

Miller believes that even with the UFLPA and other regulatory initiatives, the real driver here is business and business operations. He believes it will require organizations to recognize that their organizational footprint, for each business extends beyond the four corners of the organization. This will come into play for financing whether through private equity investment, public market offerings, bank loans or other mechanisms. It has not extended down into individual responses to requests for quotes in the business world.

Equally importantly, he said, “it’s also about who you chose to do business with, who you chose to profit from, and it’s not enough that you can just say, well, I outsource the bad stuff; slaves being used in my supply chain and bribery occurring in the same place. That is no longer a sufficient answer. It’s this assessment, it’s this realization that you are the sum of your components. You are the sum of your relationships. The business is not an island. It’s everything being pulled together and your entire impact on the globe, on the people on the world, on the business processes that derives your profitability now must be considered. And that’s quite revolutionary. If you think about it.”

Join us in Part 3, where we consider the new world of product compliance and ESG.

To listen to the podcast this blog post is based upon, click here.

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The Compliance Life

Maria D’Avanzo – Move to 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 Maria D’Avanzo. We discuss Maria’s journey from a real estate and probate lawyer to compliance,  then CCO chair, and now as the Chief Evangelist Officer at Traliant.  

The 2008 financial crisis caused a downturn in real estate work so Maria sold her law practice. This precipitated her move into the compliance field. Maria began her first compliance role at a real estate focused private equity shop. Here she registered investment adviser and broker dealer entities and obtained series 7, 63 and 24 licenses.  After four years, Maria moved to Deputy Chief Compliance Officer at AIG Asset Management where she led a team of compliance professionals handling regulatory compliance matters on behalf of both registered investment advisers and broker dealer entities in North America.

Resources

Maria D’Avanzo LinkedIn Profile

Traliant.com

Categories
Innovation in Compliance

Supply Chain and ESG – What You Need to Know: Episode 1 – ESG Drivers with James Calder and Jared Connors

 

James Calder and Jared Connors are today’s guests on this premier episode of the 5-part series, Supply Chain and ESG – What You Need to Know. This series is sponsored by Assent. In this conversation, they chat with Tom Fox about how ESG impacts a company’s performance presently and in the future.

 

 

Before the pandemic, many companies were very dependent on global supply chains. But now that the pandemic has started, companies need to be more resilient and focus on environmental resilience. This means that they need to be careful about where they get their supplies from because there is a risk of disruptions. Additionally, companies that can’t demonstrate that their products don’t violate human rights are at a disadvantage. Without evidence that they are adhering to labor laws, they could lose business to their competitors, Jared tells Tom. 

 

ESG can help companies save money and be more efficient. “When you think about that in the context of labor… if you’re helping the well-being of these organizations or these individuals out there working in these organizations, oftentimes you see a lot more efficiency and better quality in their work,” Jared says. 

 

Resources

Assent

 

Categories
The Corruption Files

Episode 09: Odebrecht/Braskem with Tom Fox and Michael DeBernardis

Brazilian petroleum company Petrobras caught itself in an intricate bribery scheme involving top construction corporations like Odebrecht and Braskem and political parties. Tom Fox and Michael DeBernardis lay out the facts and share their insights on what lessons other companies can learn and practice to avoid similar compliance troubles.

▶️ Odebrecht/Braskem with Tom Fox and Michael DeBernardis

Key points discussed in the episode:

✔️Tom Fox gives a brief background on the Petrobras-Odebrecht-Braskem case.

✔️Michael DeBernardis clarifies more facts on the case, such as the bribery feedback loop and the increasing spending on litigation. Tom Fox adds that even if you “create bad law, it’s still a law.” It has also brought attention to compliance authorities and politicians in Brazil. More companies in other countries were also involved in the scheme.

✔️The bribery scheme was intricately designed to avoid compliance detection. Michael DeBernardis recommends ensuring maximum procurement controls. Petrobras employees benefited mostly in this case. This case has emphasized the importance of visibility in supply chains.

✔️Michael DeBernardis emphasizes the importance of having appropriate controls to mitigate supply chain risk despite being lower than other aspects of the business. It also exposed the massive scale of corruption.

✔️Michael DeBernardis and Tom Fox hit home their suggestions to companies: Do a deep risk analysis, get to know your joint venture partners, and any form of defense is helpful. Although the danger is not easy to detect up front, it can help lessen the risk. Also, you should not close the doors to working with businesses with a little bit of controversy.

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Do you have a podcast (or do you want to)? Join the only network dedicated to compliance, risk management, and business ethics, the Compliance Podcast Network. For more information, contact Tom Fox at tfox@tfoxlaw.com.

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Innovation in Compliance

Compliance and the Chain of Value Creation with Simon Severino

 

Simon Severino studied philosophy at the University of Vienna and later became a business coach at a global consultancy. Two decades of experience led him to found his own consulting firm, through which he now advises business leaders about market strategy via his Strategy SprintsTM Method. He and Tom Fox explore his signature methodology and how it translates into creating value in the compliance space.

 

 

The Problem of Strategy

Simon tells Tom that the problem was how to create strategy. There are tools to analyze the market and figure out how to enter it. However, the tools to build an organized, aligned team that gets feedback quickly were missing. Since the executive team is removed from the market, they don’t have closed loops. “For the last 15 years, I’ve been obsessed with just building that [tool],” Simon comments. “How can an executive team have an agile way of doing things so it feels like a sports team? That’s what I’ve been building. That’s now the Strategy SprintsTM Method and the Strategy SprintsTM Company and the Strategy SprintsTM product, which is 90 days coaching of executives.”

 

The Chain of Value Creation

“I always see the whole chain of value creation or the chain that really matters,” Simon says. The chain doesn’t stop at his clients; their clients are part of the chain as well. He says that compliance officers should consider how they can become a valuable contribution to the whole chain. He suggests that they see themselves as business partners. “Always see yourself as a business partner of your internal colleagues and… everybody serves the client out there.” Tom responds that putting the customer first translates into greater profitability. It means you become a business generator instead of a cost center, he tells Simon. They discuss Peter Drucker’s contribution to the practice of management, and how he influenced Simon’s work. “My whole work is Peter Drucker’s philosophy plus agile methods for the digital age,” Simon comments. The concept of efficiency vs effectiveness is one of Drucker’s principles he adopts: “Spend more time on effectiveness, finding out what’s the right thing to do in the first place.”

 

Strategy SprintsTM 

Tom asks Simon to talk about the key points in his book Strategy Sprints: 12 Ways to Accelerate Growth for an Agile Business. Simon responds that it’s about asking yourself what is the right thing to do now. In today’s digital age, with broken supply chains and volatile markets, it can be difficult to make decisions. The book provides case studies and blueprints for taking the right actions in various areas like operations, marketing, sales, hiring, and client onboarding. Many CEOS today are talking about how to renegotiate contracts so that they reduce the risk of something going wrong. They can do this by splitting the risk and making sure that costs are variable instead of fixed. This will help them be more prepared if something does happen. “Risk management is the highest art form when you run a business because everything is risk/reward ratio,” Simon comments. “You have to become very good at weighted probabilities.” He explains why he thinks Elon Musk is a master of risk management, and why it’s the safer way to build a business.

 

Resources

Simon Severino on LinkedIn

Strategy SprintsTM | Website | Book

 

Categories
Daily Compliance News

September 13, 2022 the ABC Edition

In today’s edition of Daily Compliance News:

  • Banking regulator hires climate risk chief. (WSJ)
  • Accountants in the role of ABC. (Accounting Today)
  • Will the US help South Africa ABC efforts? (GAB)
  • SEC charges VMWare with misleading investors. (Reuters)
Categories
Blog

Supply Chain and ESG – What You Need to Know: ESG Drivers

I recently had the opportunity to visit with several folks from Assent Inc. for a sponsored podcast series entitled Supply Chain and ESG – What You Need to Know. We discussed: ESG drivers with Jared Connors and James Calder; UFLPA, Supply Chain and ESG with Travis Miller and Jamie Wallisch; the New World of Product Compliance and ESG, with Cally Edgren and Devin O’Herron; Emissions Reporting Strategies with Devin O’Herron and Jared Connors; and Responsible Minerals, Supply Chain and ESG, with Jared Connors and Daniel Zamora. Today we consider key environmental, social and governance (ESG) drivers.

We began with some of the key factors driving ESG. The pandemic was a major driver and the Russian invasion of Ukraine another key event. Calder believes that key issues around sustainability overlaid with increased regulatory and investment pressure have also been key drivers. The pandemic emphasized the huge dependency on global supply chain, and everyone realized we have to become more resilient and maintaining resilience also increased the need for environmental resilience.

Additionally, there are multiple drivers for human rights, built upon the UK Modern Slavery Act,  such as the Uyghur Forced Labor Prevention Act (UFLPA). Laws are being created focusing on the environment, human rights and especially supply chain due diligence. It can even be a risk now to source from regions that do not abide by the appropriate environmental controls or do not abide by our expectations on human rights, all of which can lead to a supply chain disruption.

Obviously, investors, lenders and even insurers are looking at ESG issues with the constituencies. Connors emphasized the commercial pressures companies are under regarding ESG. He related, “today alone, I’ve had calls with three companies about this.” He went on to add issues can range “from social accountability looking upstream at all their suppliers of parts and sub-assemblies. If I don’t meet these obligations, I can’t ship into a certain geography. And they were talking about restrictions on being able to import goods into the United States and the pressures that they were feeling from their customers on showing their due diligence on what their labor practices were to their customers.”

Another significant driver is in talent acquisition and retention where companies are looking at competing for new employees and trying to attract new talent into their organizations. Companies want to show their leadership in sustainability because there is a new generation of employees who want to work for and at companies with sustainability values. Not surprisingly, Connors sees investor relations as a fundamental driver of ESG and interestingly, “investors are looking at that from a non-financial reporting, as much as they are looking at it from a financial performance aspect. In fact, the more C-suite level individuals I talk to, they say that ESG sustainability is more of what their shareholder meetings are than what their financials are anymore.”

We also considered where the ESG drivers may be down the road. Calder noted it is unusual because there is both legal and regulatory pressures in addition to the market pressure. These market pressures will only grow from what we are seeing now in terms of sustainability and ESG and they are being weighed stronger in the bid process. He noted, “customers are coming to us saying we’re actually losing bids.” But this provides a market opportunity that if you can demonstrate “qualities that are superior to your competitors in these areas, you could win more bids.”

One driver that does not get as much as it should is the business operations aspect of ESG. Connors grew up professionally in the conflict mineral space where companies were required to take a deep due diligence drive into their supply chain. This provided companies with solid information which led to the opportunity to discover inefficiencies. ESG offers companies that same opportunity with data, to determine if there are operational inefficiencies. If there are inefficiencies, business solutions can be brought to bear to help make companies actually run more efficiently from the data collation required for an ESG program.

Calder concluded with a caution about green washing. He said, “we see through a lot of our monitoring of the supply chain” and that companies export more regulatory oversight around carbon emissions and reporting. The US Securities and Exchange Commission (SEC) has created their own enforcement task force for ESG. “The SEC will expect standards. The SEC will expect auditing. They expect you to be able to back up what you say and that backing up what you say does come from a reporting requirement.”

Join me tomorrow where I consider the UFLPA, supply chains and ESG.

To listen to the podcast this blog post is based upon, click here.

Categories
All Things Investigations

All Things Investigations: Episode 11 – The GC Role in CCO Certification with Mike Huneke

 

Welcome to the Hughes Hubbard Anti-Corruption and Internal Investigations Practice Group’s Podcast, All Things Investigations. In this podcast, host Tom Fox and returning guest Mike Huneke of the Hughes Hubbard Anti-Corruption & Internal Investigations Practice Group, highlight some of the key legal issues in white collar investigations, locally and internationally.

 

 

Mike Huneke is a partner in the firm’s Washington office. Among many other things, Mike advises clients on the navigation and resolution of multi-jurisdictional criminal or Multilateral Development Bank (MDB) anti-corruption investigations, assisting companies subject to post-resolution monitorships or other commitments, and designing and executing risk-based strategies for due diligence on third parties.

 

Key areas we discuss on this podcast are:

  • Explaining the new CCO certification policy the DOJ has released.
  • The DOJ has likely made changes to CCO certification policy due to a significant feeling of mistrust about the adequacy of some companies’ compliance with the terms of settlements.
  • How has the DOJ evolved?
  • Reasonableness is not a factual basis. 
  • Companies with full transparency are unlikely to have conflicts due to the recent changes in CCO certification.
  • What is the role of the monitor?

 

Resources

Hughes Hubbard & Reed website 

Mike Huneke

 

Categories
The ESG Report

Hughes Hubbard & Reed’s New ESG Resource Guide, Part 2

 

Tom Fox welcomes Alexandra Poe, Andrew Fowler, and Bryan Sillaman of Hughes Hubbard & Reed (HHR) to part two of this series of the ESG Report. Hughes Hubbard & Reed released their newest ESG guide with practical guidance about the most common issues in establishing an ESG program. It also gives companies resources to help them comply with the evolving ESG expectations of regulators and investors.

 

 

Key ESG Topics In the Resource Guide

Tom asks Andrew and Alexandra to highlight the key ESG topics seen in the corporate sector that are covered in the resource guide. Alexandra says that before companies tackle any technical compliance concerns they must first understand that “[technical compliance] is a topic that involves governance strategy and mission and culture questions”. This chapter of the resource guide urges corporations to focus on the current trends. 

 

Andrew explains that there are many evolving ESG topics in this new social and political climate, so it may be difficult to choose umbrella topics for the corporate sector. However, he explains that most topics can fall into the category of risk assessment. Stakeholders and investors always need to ensure they’re investing in a safe business, so risk and mitigation planning is always a main issue. 

 

The Regulatory Environment

Tom asks Bryan how he assesses the regulatory landscape. Bryan says that the regulatory environment is constantly and rapidly evolving and it varies from region to region. The EU is more advanced than the US when it comes to regulatory efforts: they have several laws in place to limit greenwashing and identify environmentally friendly activities and sustainable economic activities. However, with the SEC rules in the final stages of being implemented, the US is on pace to become an ESG-friendly landscape. 

 

ESG From An Investor’s Perspective

Tom asks Alexandra to discuss how ESG is viewed by funds and investment advisors. Alexandra explains that ESG is viewed as an expensive commodity within the US. ESG regulations are better implemented by the private sector. The private sector is more likely to urge itself and government-based companies to make better disclosures and examine their practices better. She points out that companies always follow through with the ESG regulatory efforts they implement because it boosts their public image and aligns with their mission statement. 

 

Resources

Alexandra Poe | LinkedIn 

Andrew F. Fowler | LinkedIn

Bryan Sillaman | LinkedIn 

Hughes Hubbard & Reed | How to ESG: A Resource Guide for Establishing an ESG Program for your Company