Compliance Assessments

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Compliance officers are honest about the strengths and weaknesses of their compliance programs.  They are realists and mission-driven.  As such, they are always willing to consider and try new ideas and strategies.

In recent FCPA settlements, the Justice Department has required companies to conduct a compliance assessment from a macro viewpoint in order to target certain high-risk areas for audits.  The idea is a good one and it is not surprising that the Justice Department has adopted the technique.

The question is my mind is how should the company conduct the global risk assessment?  Should it be done internally or with the assistance of outside professionals?

As an outside professional (and with a slight bias), I believe that chief compliance officers should avoid an internal assessment, and instead rely on a team approach which may include internal officers and external professionals.   

My advice is based on a very simple proposition – internal compliance professionals sometimes need an outside perspective.  It is good to hear “fresh” ideas and responses to long-standing compliance issues.  New ideas can lead to more effective solutions.  Sometimes compliance officers live in the “company bubble,” and need to work outside the bubble to gain new insights.

The composition of the team is an interesting question.  Lawyers (like myself) can be very helpful and, most importantly, can protect communications with the privilege.  Forensic accountants and compliance consultants can add to the team but do not include any communications protections which are invaluable when conducting a global compliance assessment.  Nonetheless, forensic accountants and consultants offer their own perspectives, and the issue usually boils down to personalities and compliance approaches.

When examining a global compliance program, I like to frame the analysis as comparable to peeling back layers of a global program to see how each function works and ultimately fits together.  As you look deeper and deeper into the organization, you quickly identify potential issues.  Forensic accountants are able to assist in this process by focusing on the money trail and the existence or absence of effective controls.

A global compliance assessment is not meant to be exhaustive or a detailed, costly undertaking but is meant to help bring fresh ideas to the compliance program and identify broad issues for further examination.

In broad terms, the inquiry should focus on these common principles:

  1. How are compliance goals defined?
  2. What is the quantity and quality of communications between the board and compliance?
  3. Who is responsible for compliance at every level of the organization?
  4. How do the compliance personnel communicate and coordinate with each other across business divisions, and how do they report compliance issues up and down the organization?
  5. How are compliance functions monitored, measured, reported and assessed?
  6. How does compliance coordinate and interact with human resources, legal, finance, senior management, the board, and other interested entities inside the organization?
  7. What, if any, role do outside professionals play in the compliance operations?

If the minimal resources needed to undertake this inquiry are available, compliance professionals should take the time and make the effort to conduct such an examination.  It is an inquiry well worth the expense and the time, and could lead to significant improvements in an overall compliance program.