Welcome to the Daily Compliance News. Each day, Tom Fox, the Voice of Compliance, brings you compliance-related stories to start your day. Sit back, enjoy a cup of morning coffee, and listen to the Daily Compliance News. All from the Compliance Podcast Network. Each day, we consider four stories from the business world: compliance, ethics, risk management, leadership, or general interest for the compliance professional.
Stories we are following in today’s edition:
In the short span of the 21st Century, the world’s two top powers, the United States and China, have moved inexplicably toward a showdown. This evolved from a commercial competition into something more akin to permanent non-kinetic warfare. What does this mean for US business doing business in and with China? In this special 5-part Series, Tom Fox and Brandon Daniels, CEO of Exiger, a leading global third-party and supply chain management software company, explore issues diverse as a real danger, supply chain, exports, cyber-attacks, and IP theft from the business perspective and give the compliance and business executive their viewpoints on what you can do to not only prepare your company but protect it as well. In Part IV, China’s aggressive tactics to steal intellectual property, we consider the responses to protect the US’s IP and how to take aggressive action against the Chinese government to seek remuneration for stolen assets.
What are China’s aggressive tactics in stealing intellectual property from countries all over the world? Through intelligence gathering, academic partnerships, and supply chain buyouts, China has managed to copy and counterfeit American business products and other technologies. Companies must harden their defenses and refuse to stand for IP theft by using the Rule of Law to take a stand against the theft of US intellectual property. Through a concerted effort, companies can fight back and reclaim their assets.
Key Highlights:
1. How is China aggressively stealing intellectual property and technology?
Notable Quote
“We foment innovation everywhere; anyone, anywhere, can be an innovator, can invent, and can end up getting the rewards from that.”
Resources
Tom Fox
Connect with me on the following sites:
Other episodes in this Series:
Episode 1-From Potential Conflict to Real Danger
In the short span of the 21st Century, the world’s top powers, the United States and China, have moved inexplicably toward a showdown. This evolved from a commercial competition into something more akin to permanent non-kinetic warfare. What does this mean for US business doing business in and with China? In this special 5-part series, Tom Fox and Brandon Daniels, CEO of Exiger, a leading global third-party and supply chain management software company, explore issues diverse as a real danger, supply chain, exports, cyber-attacks, and IP theft from the business perspective and give the compliance and business executive their viewpoints on what you can do to not only prepare your company but protect it as well. In Part III, we consider issues related to US exports to China and markets for US products if the China market is closed off to US companies.
The US-China conflict is intensifying, and as a result, businesses that export to China are feeling the strain. US companies exported nearly $149 billion worth of goods to China, but China still exports over $400 billion to the US. Do these trade deficits still matter? What happens when your biggest customer is no longer available? How do you go about finding new markets and reshoring customers? Join us as we explore this and other export issues in Part 3 of this special five-part series.
Key Highlights:
1. The importance of balancing the US-China economic relationship in light of the current crisis.
2. How does a business consider customer location an existential risk?
3. The potential for global economic rebalancing through collaboration between democracies.
Notable Quote
“We have to figure out how to make this a global market and ensure that this doesn’t just become some sort of nationalistic retrenchment.”
Resources
Tom Fox
Connect with me on the following sites:
Other episodes in this Series:
Episode 1-From Potential Conflict to Real Danger
In the short span of the 21st Century, the world’s two top powers, the United States and China have moved inexplicably toward a showdown. This evolved from a commercial competition into something more akin to permanent non-kinetic warfare. What does this mean for US business doing business in and with China? In this special 5-part podcast series, Tom Fox and Brandon Daniels, CEO of Exiger, a leading global third-party and supply chain management software company, explore issues diverse as a real danger, supply chain, exports, cyber-attacks, and IP theft from the business perspective and give the compliance and business executive their viewpoints on what you can do to not only prepare your company but protect it as well. In Part II, we discuss the issues in the Supply Chain, including issues of human rights, forced labor, and supply chain management in the Asia Pacific region.
Obviously, the issues around Uyghur forced labor in China are an important consideration for all American businesses with supply chains in China. While that issue focuses on human rights, it is also a wider world economic issue that requires a business solution. The key is to diversify the supply of goods, investing in other countries’ manufacturing capabilities to ensure that human rights abuses do not go unchecked.
Key Highlights:
1. What is the inextricable connection between human rights and economic policy when it comes to current geopolitical tensions with China?
2. How is the subjugation of Uyghurs in Xinjiang impacting the global economy?
3. What risks does reliance on China’s manufacturing pose for businesses, and how can companies diversify their supply chain to mitigate them?
Notable Quote
“It just takes investment. It takes time, but it’s an investment worth having because it provides us security in the potential and the ever more serious potential of a conflict with China.”
Resources
Tom Fox
Connect with me on the following sites:
Other episodes in this Series:
Episode 1-From Potential Conflict to Real Danger
In the short span of the 21st Century, the world’s two top powers, the United States and China, have moved inexplicably toward a showdown. This evolved from a commercial competition into something more akin to permanent non-kinetic warfare. What does this mean for US business doing business in and with China? In this special 5-part podcast post series, Tom Fox and Brandon Daniels, CEO of Exiger, a global leading third-party and supply chain management software company, explore issues diverse as a real danger, supply chain, exports, cyber-attacks, and IP theft from the business perspective and give the compliance and business executive their viewpoints on what you can do to not only prepare your company but protect it as well. In Part I, from potential conflict to real danger.
Are your relationships headed toward conflict or real danger? Find out in this first episode of this special 5-part podcast series. In this series, Tom is joined by Brandon Daniels, who is an advocate for free markets and democracy and is passionate about providing transparency to the global corporate ecosystem. As this podcast series was being recorded, Chinese authorities arrested employees of the Mintz Group in Beijing. The Mintz Group is a well-known and well-respected international investigations firm. This is one more step in the increasing opacity of the Chinese market. They consider the economic battle being lost to Chinese companies due to their coercive tactics. How do cheap bids pose national security risks? Explore these topics and more in this episode.
Key Quote- Brandon Daniels
“Don’t just go with the cheap bid. Pay attention to the national security risk that a cheap bid from one of these Chinese companies could mean to your business and think differently about how you establish security in critical products.”
Key Takeaways
Resources
Tom Fox
Connect with me on the following sites:
In this very unique ESG Report, Tom Fox welcomes special guests, Daniel Banes and Mark Henderson. Daniel Banes is the President of Commercial Tech and Mark Henderson is the Director of Solution Design Lead at Exiger, a company dedicated to altering the playing field related to fraud and financial crime. In this powerful episode, they discuss the effects of ESG in the energy industry and the role of the supply chain in ESG.
The Evolution of ESG in the Energy Industry
Tom asks how ESG regulatory risk management has evolved within the energy industry. Mark explains that historically consumers, governments, and companies focused on the environmental issues in ESG, but recent global trends and regulations brought social issues to the forefront. Mark says that the Supply Chain Due Diligence Act that would come into effect in Germany on January 1st, 2023 is an example of social issues taking the front seat globally. This act would “require companies to identify, assess, prevent and remedy human rights risks, and impacts across their supply chains”. If companies do not comply with these laws, they are at risk of being fined and possibly excluded from earning contracts in Germany’s public sector for up to three years.
Climate Risk Management versus the Energy Industry
Recently the SEC proposed new rules about climate risk management disclosure and Tom asked Daniel how he thinks it would affect energy companies. Dan responds that it means that energy companies would now be held accountable; over the years most companies proposed that they would be carbon neutral by a certain date, and it never materialized. “Having this disclosure rule gives the public insight – across the board for all public companies – into those targets that companies are committing to climate-related risks,” Mark says. He adds that financial statements would be audited allowing for more accountability for these companies.
Managing Scope Three
Tom asks Daniel how he believes energy companies would manage Scope Three and how they could be connected to the proposed SEC rules about accountability and transparency. Mark explains, “Scope Three [is] about having data to look into your supply chain and understand emissions that are within your supply chain and have those conversations with your suppliers.” Additionally, it allows a more wholesome relationship to flourish across your supply chains and for efficiencies to be detected before discussing environmental control and risk and emissions.
Resources
Daniel Banes | Exiger Profile | LinkedIn
Mark Henderson | Exiger Profile | LinkedIn
Exiger | Exiger’s Supply Chain Explorer
Welcome to a podcast series on the fight to secure Supply Chains through cross-industry innovation. Exiger sponsors this series. In this series, we will explore the ongoing efforts of Exiger to lead the discussion and enhancement of Supply Chain Risk Management.
Over this series, I visit with Erika Peters, Senior Vice President and Global Head of Third Party & Supply Chain Risk Management; Tim Stone, Senior Director, Supply Chain Risk Management for Exiger Federal Solutions; Kim Lee, Director who focuses on risk and compliance; Nick Wildgoose, a Consultant at Exiger; Skyler Chi, Director and Deputy Head of Supply Chain and Third-Party Risk Management; Andrew Lehmann, Associate Director at Exiger; Jennifer Nestor, Vice President at Exiger, Americas and Public Sector; Theresa Campobasso, Senior Director for Defense Programs at Exiger; Dan Banes President of Commercial Technology, and Mark Henderson, Director of Solution Design Lead.
In this concluding episode 5, we discuss Supply Chain issues with Dan Banes and Mark Henderson in the energy sector. Highlights of this podcast include:
Resources
Dan Banes Profile
Mark Henderson Profile
Exiger Website
Exiger’s Supply Chain Explorer
Welcome to a blog post series on Exiger’s fight to secure supply chains, sponsored by Exiger LLC. In this series, we have explored the ongoing efforts of Exiger to lead the discussion and enhancement of Supply Chain Risk Management. In our concluding episode 5, I visit with Dan Banes, President of Commercial Technology, and Mark Henderson, Director of Solution Design Lead, and discuss supply chain issues in the energy sector.
Energy is one of the high-profile natures of the energy business, with long-standing business relationships, literally around the globe. Due to this high-profile nature, anytime there is a cyber-breach, it garners much attention. To see this play out, one only has to look at the Colonial Pipeline hack. This profile means that the whole world is watching the energy and the energy ecosystem.
We discussed some of the key drivers for change within the energy industry around third-party and supply chain risk management. Banes believes there are a couple of key trends in energy around supply chain risk management. The first is transparency (or perhaps lack of transparency) and the fact that many energy companies only have visibility into the first layer of their supply chain. This could be in the company they purchase their hardware from or the software products they install. He believes energy companies need to go down into those next layers to understand the additional suppliers that feed into those pieces of hardware or software.
The second area we reviewed is the monitoring of cybersecurity risk. Henderson said typically, and the approach has focused on “things like questionnaires and attestations that companies sign that say that they have a robust cybersecurity program.” He said, “now data is available for companies to do their homework themselves. This allows companies to understand the different companies within their supply chain and have transparency of the third parties you deal with directly and those suppliers down the chain. It allows a company to be alerted to a vulnerability and then quickly mitigate before a cyber security breach or attack happens.”
He believes companies will have to continue to push down responsibilities to that wider supply chain ecosystem. Companies are starting with their highly critical supply chain partnerships and ecosystem vendors. This has led to a “quite a collective dialogue, which is beneficial for the industry. If you go back to the point, we made earlier, one successfully compromised entity can have a ripple effect across the supply chain. It is better equipped for a successful defense if the industry can move their standards and best practices forward together.”
We then turned specifically to Russia sanctions. Here Henderson returned to transparency; companies need to understand the networks of parties they are dealing with. But it is more than simply understanding the company; and it also understands the owners of that company, the ultimate beneficiary, the key management personnel, so you can make sure that none of the individuals associated with the company are sanctioned individuals or on a Specially Designated National (SDN) list. This level of transparency and screening should be maintained on an ongoing basis to ensure that you stay up to date with all new sanctions. This is a fast-paced environment and ensuring that you have controls in place and the transparency in the companies you deal with is very important. The second component is ensuring you have proper supply channels. Russia and Russian companies are large exporters of energy products. This will impact the supply chain for several energy companies and has already caused supply shortages in many cases.
We concluded by looking at Environmental, Social, and Governance (ESG) and how ESG regulatory risk management has evolved within the energy industry. While most compliance and supply chain professionals understand that the ‘E’ has traditionally been the most letter within the ESG acronym, the ‘S’ within ESG, the social issues, is rapidly becoming as important a focus area as the ‘E’ has traditionally been. Banes noted a “huge commercial incentive for companies to move forward in this space; appropriately and effectively.” It could be based on legislation, such as the UK Modern Slavery Act or its German equivalent, but it could also be pressure from key stakeholders such as customers or employees. He noted this “will require companies to identify, assess, prevent, and remedy human rights, risks, and impacts across their supply chains.”
The recently proposed Securities and Exchange Commission (SEC) rules on reporting material climate change risk point to many concepts we touched on herein. Henderson noted that initially, these proposed rules were “meaningful accountability.” But Scope 3 adds “the transparency component as you are also moving down the supply chain and leading to perhaps commercial opportunities that were not present before because of collaboration.” Banes noted, “it does come with an opportunity to have a more meaningful relationship across your supply chain and find those efficiencies even that we were discussing across the control environment but finding those efficiencies when it comes to environmental risk and emissions. To obtain the data required for Scope 3 requires that partnership and the industry come together to find those efficiencies within the supply chain.”
Resources
Dan Banes Profile
Mark Henderson Profile
Exiger Website
Exiger’s Supply Chain Explorer
Welcome to a podcast series on the fight to secure Supply Chains through cross-industry innovation. Exiger sponsors this series. In this series, we will explore the ongoing efforts of Exiger to lead the discussion and enhancement of Supply Chain Risk Management.
Over this series, I visit with Erika Peters, Senior Vice President and Global Head of Third Party & Supply Chain Risk Management; Tim Stone, Senior Director, Supply Chain Risk Management for Exiger Federal Solutions; Kim Lee, Director who focuses on risk and compliance; Nick Wildgoose, a Consultant at Exiger; Skyler Chi, Director and Deputy Head of Supply Chain and Third-Party Risk Management; Andrew Lehmann, Associate Director at Exiger; Jennifer Nestor, Vice President at Exiger, Americas and Public Sector; Theresa Campobasso, Senior Director for Defense Programs; Dan Banes President of Commercial Technology, and Mark Henderson, Director of Solution Design Lead.
In this episode 4, we discuss Supply Chain issues in the defense industrial base (DIB) with Jennifer Nestor and Theresa Campobasso. Highlights of this podcast include:
· The DIB’s role in Supply Chain Security;
· What has changed for the DIB regarding Supply Chain Risk Management; and
· How the DIB responds to the government-led changes in Supply Chain standards.
Resources
Jennifer Nestor Profile
Theresa Campobasso Profile
Exiger Website
Exiger’s Supply Chain Explorer
Welcome to a blog post series on Exiger’s fight to secure supply chains, sponsored by Exiger LLC. In this series, we explore the ongoing efforts of Exiger to lead the discussion and enhancement of Supply Chain Risk Management. In Episode 4, I visit with Jennifer Nestor, Vice President, Americas and Public Sector, and Theresa Campobasso, Senior Director for Defense Programs. We discuss supply chain issues in the defense industry.
We began with the role of the supply chain in the Defense Industrial Base (DIB). Nestor said, “the DIB is different from other sectors for several reasons, but two stand out. The first will be the unique relationship this sector has with national security missions. The DIB’s role includes defense research and development, production, delivery, and maintenance of military weapons systems, sensors, and other critical technology. This direct impact on US National Security means that the resilience and stability of the DIB and its supply chain are critical to ensuring US economic security and military technological superiority. Moreover, unlike other sectors, the US Defense Community’s ability to protect our nation rests greatly on the DIBs’ risk management efforts to fortify their supply chain, software, and hardware products. The second differentiator is the high rates of foreign adversary targeting that DIB companies experience as opposed to typical commercial organizations. This means that foreign intelligence actors like nation-states, organizations, or individuals employ aggressive actions like foreign investment, M&A activity, espionage, and supply chain and cyber operations to access the US critical infrastructure to steal sensitive information and disrupt our supply chains.”
We then turned to what is new for the supply chain in this area. The heightened pressure on supply chain security, specifically the higher regulatory standards related to supply chain due diligence, the increasing complexity of global supply chains, and, most importantly, the growing availability of data to support SCRM deep into the sub-tier supply chain. Nestor believes that the only way the DIB can ensure they support the Department of Defense’s (DOD) acquisition strategy is by investing in AI technology to map their supply chains and relationships throughout their programs. You can review both direct and indirect exposure to goods and materials from foreign adversaries and nation-state actors by performing supply chain illuminations. This allows you to map the sub-tier supply chain and provides insights regarding risks like counterfeit parts, IP compromise, and critical technology theft.
Campobasso noted an increase in executive orders and regulations over the last several years to address much-needed supply chain security reforms. Interestingly, many of these proposed higher standards put the responsibility on the DIB to prove and demonstrate this level of supply chain transparency and risk management. She cited the example of the “Uyghur Forced Labor Prevention Act, which requires vendors doing business with the government to establish evidence that goods are not the product of forced labor. Another example is the Feb 2022 DOD action plan to secure Defense-Critical Supply Chains.”
The DIB has responded to both these initiatives and challenges. Many large DIBs have moved to acquire an enterprise solution that gives them transparency and actionable intelligence beyond the first tier. Nestor said, “we are seeing the increased emphasis on risk management, and the DIBs are bringing large groups of often 20+ stakeholders to evaluate SCRM capabilities.” Moreover, this “cross-functional collaboration challenges both pre-sale and post-sale to gain consensus and determine how to manage the data and continuous monitoring, mitigate the risks and truly operationalize this increased capability.” Interestingly, the “DIB is also figuring out how to share the SCRM information with their sub-tier suppliers to drive accountability and how best to influence at that level.”
We conclude by considering how the DIB responds to this heightened level of risk insights. A truly effective SCRM solution is more comprehensive than just sanctions or watchlist checks. Campobasso noted that Exiger has a long history of assisting the Defense community to uncover hidden risks, helping to manage those risks, and making supply chains more transparent and secure, mainly through technological innovation and solutions. Specifically, the TRADES framework enables DIBs to measure SCRM program progress over time to ensure appropriate Return on Investment (ROI). Nestor concluded that there is still some organizational change resistance to these innovations. However, she believes that the key is to involve as many key stakeholders across the business and bring consensus to your project.
Join us tomorrow, where we will spotlight the energy sector.
Resources
Jennifer Nestor Profile
Theresa Campobasso Profile
Exiger Website
Exiger’s Supply Chain Explorer
