In today’s edition of Daily Compliance News:
Welcome to a special five-part blog post series on how to unlock the gold in your program. I visit with Gio Gallo and Nick Gallo, Co-CEO’s of ComplianceLine, LLC, the sponsor of this series.
One of the ongoing issues in compliance is to demonstrate the Return on Investment (ROI) in your compliance program. One way to do so is by demonstrating the extended value of compliance literally across your entire company. When overlaid with an ESG component, you can begin to see the gold in your compliance hills. In addition to showing how you can unlock the gold in your own compliance hills, Gio and Nick discussed demonstrating ROI for your internal budgeting process which can provide to you the financial resource to strengthen and improve your compliance program. Today, in Part 3, we look at the role of the Chief Compliance Officer (CCO) and corporate compliance function in ESG investments.
We began with the basic question of why a Chief Financial Officer (CFO), or corporate finance function look at ESG investment and how it will be different than a CCO or compliance function would do so. Gio noted that finance will most probably be “considering the outcome and it is something else for me to figure out.” Yet they may well also see it as a new opportunity and a “new conversation that we can be a part of. We may be able to get to that head of the pack because through some early investments which might be in programs or just how we talk about it.” The impact is that finance types might see more opportunities in this than the E&C professional, which you should be conscious of as you enter this conversation. Gio stated, “if we can make something out of this zeitgeist it might be seen as a unique opportunity.”
Conversely, he also noted “there’s no F in the ESG, right? This means the finance lens for this opportunity might be to get better financing for the company.” This might present a funding opportunity, either through a loan, additional capital or other funding mechanisms. It might also work to lower the cost of capital because investors might see your company is really an attractive company. That is what ESG might end up meaning from the finance perspective. The beauty of this is that the approach is equally valid to a compliance-focused approach and demonstrates there are multiple reasons for implementing an ESG program.
Nick emphasized the opportunity that ESG presents. Not simply for each commercial organization but for the compliance function as well. He stated, “irrespective of whether or not your organization is serious about it, you need to take advantage of the opportunity and the window of opportunity that we have right now, because compliance speaks to every single one of those pillars in the ESG acronym.”
From the compliance perspective, there are several reasons for this. It is top of mind for investors and in mind of the marketplace. He said, “Use what you have in place already to show your organization is committed to ESG. Moreover, you probably already have 80% of this stuff done. We already have a speak-up line. We already have a training for our business ethics and corporate culture.” The bottom line is “there are probably a bunch of ESG type things that you are doing.” You can build on all of them. It is a massive opportunity. Do some research on what is publicly available on ESG reports, “grab a handful of those and start looking at what some of your competitors or what other folks in the marketplace are putting into their report. I guarantee there’s a massive overlap with some of the data points that already exist in your organization.” As a compliance professional “it’s about shifting your mindset and using this opportunistically, to take advantage of the amorphousness that is ESG right now.” Nick even compared ESG in 2021 to where compliance was in the mid-1990s after the release of the US Federal Sentencing Guidelines and the creation of the modern compliance professional. It took some 15 to 20 years for corporations to understand that compliance was a business differentiator and business positive and not simply a legal response to a long-standing law, such as the Foreign Corrupt Practices Act (FCPA). In the age of social media, the speed of the change in ESG will be much quicker. Simply witness the change from the Trump Administration which actively fought corporate ESG initiatives to that under the Biden Administration which has fully embraced ESG from a regulatory perspective.
We concluded by considering many of the tasks that a CCO and compliance professional are already doing. Nick provided the following examples, “You can pull that out of your case management system and look at some of the following issues: How many discrimination and harassment claims did you have last year? How many did you have this year? What were the turnaround time on those? How many days did it take you to close those? What can you take credit for? That’s really what ESG is kind of about.” The same is true for your basic risk management strategies involving your third parties and other business ventures.
It is a function of getting an understanding of who your audience is. From the compliance perspective do not simply focus on an audience of one, the government. Look at in the way the Business Roundtable did with their Statement on the Purpose of an Organization. There are multiple stakeholders that you can engage with and work with to satisfy their ESG concerns.
Check out the full podcast series this blog post series is based upon.
Episode 1
Episode 2
Episode 3
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 Wendy Badger, CCO at Tennant Company.
In this concluding episode, Wendy reflected on leaving her CCO position immediately preceding the pandemic and the time she had for reflection about that decision and what she learned about herself. She talked about her new role a Tennant and some key lessons learned she has been able to put into places such as the criticality of cross-functional collaboration, why technology should not be seen as the “cure all” to compliance woes and how to both layer and leverage data.
Resources
Wendy Badger LinkedIn Profiler
Seeing improvements, the President terminates US sanctions program on Burundi. Tune in to find out what does it mean and how do pending or future investigations fit into
Welcome to a special five-part podcast series on how to unlock the gold in your program, hosted by Tom Fox with guests Gio and Nick Gallo from ComplianceLine. One of the ongoing issues in compliance is to demonstrate the Return on Investment (ROI) in your compliance program. One way to do so is by demonstrating the extended value of compliance literally across your entire company. When overlaid with an ESG component, you can begin to see the gold in your compliance hills. In addition to showing how you can unlock the gold in your own compliance hills, Gio and Nick walk you through how demonstrate ROI for your internal budgeting process which can provide to you the financial resource to strengthen and improve your compliance program.
Join us for the full 5 episodes and learn to see your compliance program in an entirely new light. In this Part 2, we consider how compliance can be seen as extending the value of compliance across your entire organization.
Some of the highlights of this episode include:
Resources
Gio Gallo on LinkedIn
Nick Gallo on LinkedIn
ComplianceLine
The last tale but definitely not the least exasperating is “Little Timmy’s Birthday Battle.” It is written in SMS text messages exchanged between a couple, having a fight with faulty autocorrections and acronyms.
Join the fun and tune in to this new episode of F*CKING ARGENTINA with Gregg Greenberg and Tom Fox. ▶️
# LittleTimmy’sBirthdayBattle
ABOUT THE BOOK
F*cking Argentina and 10 More Tales of Exasperation by Gregg Greenberg is a compilation of short stories that dive into the American phenomenon of being in a near-perpetual state of aggravation. Greenberg’s anthology brings together eleven original pieces of work, each with their own slice of independent and distinct plot lines but all converging on the universal theme of exasperation. They run the whole gamut of scenarios, from the titular story “F*cking Argentina” wherein the country is once again in bankruptcy and a polite game of tug o’ war plays out on a porch, to “A Journeyman Tennis Player’s Prayer” with a low ranking U.S. Open contender begging God for a comparable opponent. Both stories end with the superlative f-word, which showcases at some point in other stories, and a guaranteed chuckle from their readers. Buy the book here: http://fckingargentina.com/.
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.
Tom Fox read about Jeff Grant’s work in The New Yorker and was intrigued, so he invited him on this week’s show. Tom describes Jeff’s work as “an unusual professional passion”. Listeners will be inspired by Jeff’s story: what led to his arrest and prison sentence, his redemption, and how he now helps others recover.
“I Was the Problem”
Becoming a lawyer was the perfect fit for Jeff’s skill set and attitude, he tells Tom, but it was “very bad for me in terms of bipolar disorder and my alcohol and drug abuse.” He describes his descent into white-collar crime, his subsequent arrest and resignation from his law practice. A suicide attempt, intervention, and a stint in rehab all contributed to his ‘aha moment’ and the road to recovery. “I was the one who had been doing things wrong, and I didn’t really realize that the whole time,” he recalls. “…that was the turning point that I realized that I was the problem.”
Progressive Prison Ministries
Tom asks Jeff what led him to found Progressive Prison Ministries. Going to prison sober was the catalyst, Jeff replies. He stayed sober throughout his sentence, and on his release, he started to volunteer at criminal justice and drug and alcohol nonprofits. He also went to seminary and became an ordained minister. “I just wanted to help people who were in the same situation we were in,” he tells listeners. He had to go it alone, but he wanted others like him to have someone to turn to for support. “We started this ministry to serve and support people who have been prosecuted for white-collar crimes and their families… It’s people in isolation all over the country who have no one to talk to and no one who understands their plight… We offer them a helping hand both emotionally and spiritually, and also a lot of practical information as well.”
12-Step Approach
Jeff’s approach to helping white-collar offenders recover is based on the Alcoholics Anonymous 12-step program. Unlike AA meetings, however, his meetings are facilitated by leaders. The act of sponsoring someone is ministering to them, he says; your sponsor gives you a lot of advice, in a 12-step sort of way. “The spirit of the steps are there,” he tells Tom. What’s more powerful to him, however, is the fellowship. The Monday meeting is only a small part of it, he tells Tom. He explains how they match members together, and that they keep in contact throughout the week. “It’s like being a cop,” he remarks, “you’re on the job 24 hours a day, and being in recovery is being in recovery 24 hours a day… So this is really a 24-hour a day support network.”
Supporting the Families
Tom asks, “How does the family work into white-collar recovery?” They often have it worse than the defendant, Jeff answers, because they are usually unaware of what the defendant has been doing, and reality hits them “between the eyes with something like an arrest or the FBI showing up at the door.” He comments on the high incidence of divorce and family estrangement and laments that recovery is not advanced even in his network. However, they welcome everyone who needs them, he points out. “We want to provide a place of support and comfort for anybody who doesn’t have a built-in support network or is estranged from their support networks.”
Supporting Attorneys and Grant Law
“I was really intrigued by some of the information on your website, one of which was that the white-collar support group can help attorneys struggling to cope with a broken justice system,” Tom comments. He asks Jeff to explain more about this. We try to help attorneys understand the humanity of white-collar offenders, Jeff responds. “We try to bring a full picture to a very complicated situation that people tend to want to paint with a very broad brush.” He is happy that more defense attorneys, prosecutors, judges, and probation officers want to learn how to integrate Jeff’s theology to be “more just and more merciful and perhaps more lenient” in their dealings with white-collar defendants. He and Tom discuss his own law practice. His entire practice now is with white-collar attorneys, he says. He shares examples of how he helped defendants revise their strategy by asking the right questions. Tom asks him to advise attorneys who may be struggling themselves with the same problems he did. The first step is to admit you have a problem, he says. He outlines the avenues – both personally and professionally – where help is available.
Resources
Jeff Grant on LinkedIn | Twitter
Grant Law
Prisonist.org
Welcome to a special five-part blog post series on how to unlock the gold in your program. I visit with Gio Gallo and Nick Gallo, Co-CEO’s of ComplianceLine, LLC, the sponsor of this series.
One of the ongoing issues in compliance is to demonstrate the Return on Investment (ROI) in your compliance program. One way to do so is by demonstrating the extended value of compliance literally across your entire company. When overlaid with an ESG component, you can begin to see the gold in your compliance hills. In addition to showing how you can unlock the gold in your own compliance hills, Gio and Nick discussed demonstrating ROI for your internal budgeting process which can provide to you the financial resource to strengthen and improve your compliance program. Today, in Part 2, we consider how a corporate compliance function not only extends its value across an organization but demonstrates the value add of a robust compliance function in improving overall business ROI. It is a way of thinking about your compliance that many compliance professionals fail to grasp.
We began with an exploration of how a finance professional will view things differently from the compliance professional. This is important because there really is a different mindset or at least a different lens that a corporate finance function brings, separate and apart from the compliance function lens. As Nick explained, “in the finance game, people make massive bets, investing hundreds of millions or billions of dollars on acquisitions with no real certainty around how something’s will play out. You do not know if a market will disappear; if the historical growth is going to repeat in the future; if your margin improvements are going to justify a massive purchase price.” Moreover, an “investment committee is really about pushing on those assumptions and saying do we really feel good about how we assume things are going to play out?” He emphasized that it is about “getting comfortable with that level of uncertainty about predicting the future and making bets that are foundationally built on assumptions.”
Gio emphasized that many compliance professionals either believe or are perceived to believe that a company’s bottom line can improve being less risky. However, from the finance perspective that can come across as “Fewer expenses, fewer risk of fines and things like that, or things can get better by growth and improvement. This means not simply getting more revenue but becoming more efficient and even attracting better talent.” Of course, less risk can mean less upside and many finance professionals are “used to jumping to both sides of that kind of gain and loss. This means revenue slash growth versus expense costs.” However, if, as a compliance professional, you can realize that financial professionals are trained to kind of look at the downside, “it can allow you to reframe your perspective and your approach.”
Nick emphasized, “it’s really about being opportunistic. You are opportunistically looking at this risk landscape for things that other people have not seen before.” It was this insight that I found so critical for the compliance professional. Starting with the Department of Justice’s (DOJ) Evaluation of Corporate Compliance Programs released in June 2020, it has become paramount for a Chief Compliance Officer (CCO) to have access to all company data. This necessitates working across corporate silos from the compliance perspective. It allows a corporate compliance function to have insights other functions do not have and allows compliance to “connect the dots”. Nick went on to state, “Once those light bulbs start to turn on, you can have some really powerful outcomes that you never thought would happen.”
We concluded with a discussion of the compounding effect of a corporate compliance program. Even legally trained compliance professionals have some understanding of compound interest. The compounding effect of a corporate compliance program is similar. Consider training an employee to become a compliance advocate and that employee later becomes manager. Gio related, “These are all these follow-on effects. That’s compounding.” Another way to consider this compounding effect is in handling an issue that comes into your hotline, so that person has confidence, and they tell some other people about it. Now there are five people who have confidence in your program and then two of them report. Then they tell five more people. You have this opportunity for compounding of your compliance scope. Gio added in this scenario, “I think we’re going to get 10 more reports this year. A CCO is also selling their program short if you are not drawing that line through the whole story to say this is going to well beat our 15% or three X ROI target. It’s going to blow it out of the water because there are so many ways that what we do in compliance touches the whole organization and those things compound naturally.”
The bottom line is that if you make these little changes, these 1% changes per year, that translate into 40 times impact over a 12-month period. You continue to make these small, incremental changes over time. Then the cultural difference in your organization relative to your competitors very quickly is going to separate in a nonlinear way. It’s in a separate, in a logarithmic way. And that’s where two, three or four years down the road, the real impact of the changes will become apparent the impact that we can have can really be compelling.
Check out the full podcast here.
In this episode, Director of Registered Investment Company Services, Allison Fraser and Director of Broker-Dealer Services & Private Funds, John Gentile discuss the latest on digital assets and cryptocurrency. Are they considered securities, what does the SEC’s risk alert mean for digital assets, and how should investment managers be thinking about cryptocurrency trading and compliance?
E.J. Yerzak CISA®, CISM®, CRISC™ assists firms in assessing and managing their cybersecurity risk – from network vulnerability scanning and penetration testing to onsite cybersecurity assessments and assistance in implementing the NIST cybersecurity framework. E.J. has authored articles and alerts on emerging regulatory and technology issues, and is regularly requested to speak as a cybersecurity expert at industry conferences.
