Many compliance practitioners struggle with the questions of how to measure the effectiveness of their company’s Foreign Corrupt Practices Act (FCPA) compliance program. In the January-February 2010 issue of the Harvard Business Review, authors Ramon Casadesus-Masanell and Joan E. Ricart explore business model innovation in an article entitled “How to Design a Winning Business Model”. While the article focuses on how companies might compete more effectively through business models, they present several key mechanisms which can be utilized by the FCPA practitioner in helping to determine the effectiveness of a company’s FCPA compliance program.

The authors looked to writer Joan Magretta for a definition of a business model and cited her for the following “the story that explains how an enterprise works”. This can easily be adapted by the FCPA compliance practitioner into, “the story of how your FCPA compliance program works”. The reason being is that in its simplest form, a business model “consists of a set of managerial choices and the consequences of those choices.” The authors go onto to state that a company makes three different types of choices when creating a business model, they are 1) A Policy Choice to set the course the entire organization will take; 2) The Asset Choice which relates to the resources a company will use to deploy the policy; and finally 3) there is a Governmental Choice about which of the first two choices are managed and governed.

For the FCPA practitioner, the authors list three characteristics of an effective business model. They note that a good business model will meet all three of the following, 1) Is your business model aligned with company goals?; 2) Is your business model self-reinforcing?; and 3) Is your business model robust? These characteristics are easily translated into the compliance world and can be used by the compliance practitioner in evaluating a company FCPA compliance program.