In today’s edition of Daily Compliance News:
In today’s edition of Sunday Book Review:
- Cary Grant: A Brilliant Disguise by Scott Eyman
- Chicago’s Great Fire by Carl Smith
- 150 Glimpses of the Beatles by Craig Brown
- No Rules: Netflix and the Culture of Reinvention by Reed Hastings
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In today’s edition of Daily Compliance News:
EY and imploding companies. (WSJ)
Compliance breakdowns at J&F. (WSJ)
Will offices ever be full again? (NYT)
Corruption is the ultimate betrayal of public trust. (UNNews)
What you should do with the information that you obtain in your pre-acquisition compliance due diligence. Your approach should review key risk factors which should prompt a purchaser to conduct extra careful, heightened due diligence or even reconsider moving forward with an acquisition under extreme circumstances.
In the 2020 Update to the Evaluation of Corporate Compliance Programs, the DOJ stated “the extent to which a company subjects its acquisition targets to appropriate scrutiny is indicative of whether its compliance program is, as implemented, able to effectively enforce its internal controls and remediate misconduct at all levels of the organization. The following question was posed, Who conducted the risk review for the acquired/merged entities and how was it done? The bottom line is that you must use the information you have obtain in the due diligence process and have an auditable trail if the regulators come knocking.
Three key takeaways:
- Create a list of key risk factors in your protocol.
- Create a forced risk ranking, but remember it is simply that, a forced risk ranking.
- Your pre-acquisition team should include a suitable combination of legal, accounting, and compliance personnel.
In this podcast, I am joined I am joined by Carrie Penman, Chief Risk and Compliance Officer at NAVEX Global, Inc. We visit about their upcoming 2020 virtual conference, NAVEX Next, which is entitled Beyond the Moment. NAVEX Next presents an opportunity to discuss many of these issues.
The theme, Beyond the Moment, defines the 2020 agenda and supports sessions that will help you and your organization move past a defensive stance on current events and trends. The goal is to help everyone be proactive and more holistic in their approach to risk and compliance management. If there is one key message that I have garnered in talking to compliance and other professionals about Coronavirus is that the future demands we be prepared, no matter what comes next.
What are some of the key themes for this conference? Obviously the Coivd-19 lockdowns, work from home and remote working environments have changed a large number of risk factors that every Chief Compliance Officer (CCO) needs to consider from a risk perspective and address from a variety of angles; such as data privacy/protection, communications and training and ongoing engagement.
Last year, NAVEX’s virtual conference had over 9,000 registrants. Best of all is the cost of the conference, its FREE. That is right, all of the above is available at no charge. NAVEX Global has submitted the conference to the Compliance Certification Board (CCB)® and is pending their review for approval of CCB CEUs. It will be held Thursday, October 22, from 10 AM to 4 PM Central Time. I hope that you will plan to join me for this great event. Registration, agenda and other information are available here.
For more information on Navex Global, click here.
As the (non-cheating) Houston Astros attempt to return to the World Series, Tom and Jay are back to look at top compliance articles and stories which caught their eye this week.
- J&F Investments settles FCPA criminal case. Harry Cassin (as usual) breaks the story in FCPA Blog.
- Why third-party due diligence is an ongoing exercise. Mike Volkov in Corruption Crime and Compliance. Jim Nortz takes a deep dive into 3rd party risk management in Part 1 of a six-part series on CCI.
- Citigroup spanked for $400MM by OCC and the Fed. Matt Kelly with a double dive on Radical Compliance (Part 1 & Part 2). Matt and Tom take a deep dive on Compliance into the Weeds.
- Ephemeral messaging frowned upon by SEC. Jonathan Marks in Board and Fraud.
- The WEF’s ESG reporting now includes anti-corruption metrics. Worth MacMurray and Elaine Dezenski in the FCPA Blog.
- Supply Chains under more scrutiny. Vera Cherepanova in Navex Global’s Risk and Compliance Matters.
- Some open-door tales. Richard Leisner with a guest post on the D&O Diary.
- Do the FinCen Papers show we need an AM whistleblower protection program? Hamsa Mahendranathan in NYU Compliance and Enforcement Blog.
- On the Compliance Podcast Network, on 31 Days to a More Effective Compliance Program, we continue our exploration of compliance for Business Ventures. Monday-Safe Harbor in M&A; Tuesday-Pre-acquisition DD, the business perspective (with special guest Vin DiCianni); Wednesday– Pre-acquisition risk assessment; Thursday– Pre-acquisition due diligence; Friday-Integrating post acquisition (with special guest Eric Feldman). Note 31 Days to a More Effective Compliance Program now has its own iTunes channel. If you want to binge out and listen to only these episodes, click here.
- Join Tom and Sam Silverstein for an Executive Forum on Ethics and Accountability on October 28, 2020 12-1 PM CT. Check at the agenda and register here.
- Join Tom, Holly Sais Phillippi, Head of Americas Risk Sales, Refinitiv and Kelly M. Slavitt in a Refinitiv sponsored webinar, The Future of Due Diligence: Third-Party Risk in the Era of COVID-19, Tuesday, October 27, 1-2 PM CT. Check at the agenda and register here.
- Check out the Navex Next 9th Annual Risk & Compliance Virtual Conference event Beyond the Moment October 22 from 10 AM to 4 PM. Check at the agenda and register here.
Tom Fox is the Compliance Evangelist and can be reached at tfox@tfoxlaw.com. Jay Rosen is Mr. Monitor and can be reached at jrosen@affiliatedmonitors.com.
Welcome to the newest addition to the Compliance Podcast Network, Compliance and Coronavirus. As the Voice of Compliance, I wanted to start a podcast which will help to bring both clarity and sanity to the compliance practitioner and compliance profession during this worldwide health and healthcare crisis. In this episode, I am joined by Melissa Koch, co-founder and CEO of InFront Compliance. We visit about the issues she is seeing for FinTech in new normal of Covid-19 and going forward. We also consider the state of New York enforcement action involving First American Title and its implications going forward.
InFront is a next-gen online assessment and reporting platform focused on reducing risk and simplifying compliance for highly regulated entities, such as our nation’s supply chain and financial institutions. Founded by seasoned technology lawyers with a deep understanding of the fast-evolving regulatory landscape, InFront offers a secure digital solution built on extensive expertise and an intuitive interface that is accessible across all stakeholders. You can check out their website, here.
The compliance component of your M&A regime should begin with a preliminary pre-acquisition assessment of risk. Such an early assessment will inform the transaction research and evaluation phases. This could include an objective view of the risks faced and the level of risk exposure, such as best/worst case scenarios. A pre-acquisition risk assessment could also be used as a “lens through which to view the feasibility of the business strategy” and help to value the potential target.
I suggest a four-step process to plan and execute a strategy to perform pre-acquisition due diligence in the M&A context.
- Establish a point of contact.
- Collect relevant documents.
- Review the compliance and ethics mission and goals.
- Review the elements of an effective compliance program.
There are multiple red flags which could be raised in this process, which might well warrant further investigation. They include if the target has ineffective compliance program elements in their compliance program or if there were frequent breach of policies and procedures. Obviously, a target which is in financial difficulty would bear closer scrutiny. Structurally, if the company did not have a formal ethics and compliance committee at the senior management or Board of Directors’ level, this could present issues. From the CCO perspective, if the position did not have Board or CEO access or if there were not regular reports to the Board, it could present an issue for compliance. Conversely, if there were frequent requests to waive policies, management over-ride of compliance controls or no consistent consequence management for violations; it could present clear red flags for further investigation.
Three key takeaways:
- The results of your pre-acquisition due diligence will inform your post-acquisition integration and remediation going forward.
- Periodically review your M&A due diligence protocol.
- If red flags appear in pre-acquisition due diligence, they should be cleared.
Peter Grossman is the co-founder and Chief Strategist of Labyrinth Training, a leading compliance, innovation, and training company that is redefining how compliance and code of conduct training is delivered to employees. They are dedicated to training employees through captivating storytelling. Labyrinth uses award-winning interactive design to bring their clients’ policies to life, which engages the audience and imparts knowledge when they are paying full attention. He joins Vince Walden to discuss the impact storytelling has as a teaching method, and the importance of abandoning the right-wrong answer narrative.
Labyrinth makes each training video specific to each client’s needs and circumstances. Custom-made content has a higher chance of reaching the audience and capturing their attention, as well as ensuring that the delivered training is being retained. A Stanford study showed that creating mini-narratives to memorize something works much better than rote learning.
Labyrinth has made videos about data privacy, compliance, anti-harassment, and even human rights training like debt bondage. There is no magic path your employees can walk through where they won’t encounter threats of corruption, says Peter. If you’re trying to teach a lesson where there’s a good path and a bad path, you’re teaching the wrong lesson.
Resources
Peter Grossman on LinkedIn
LabyrinthTraining.com