Monthly Archives: January 2016

Purposeful Due Diligence Is More Than A Compliance Shield

In the second part of a Front-Line Interview, Control Risks CEO, Richard Fenning, addresses the deployment of due diligence as elevating, enhancing, and complementing a sensible risk-based approach to corruption risk. In this engaging Q and A, Mr. Fenning also details:

  • The need to embed corruption risk into  business strategy.
  • The possibilities of engaging in regions and territories that have a high degree of historical corruption risk, but where multinationals might have an opportunity to “pick and choose between sectors” where lower risk opportunities exist.
  • How organizations need to be able to understand the changes in local governance in order to “act according to trends and differences.”
  • The “incremental, slow and powerful change” which is occurring in global markets and how to “harness that change for market advantage.”
  • How a compliance policy of ‘zero tolerance’ needs to “have financial and commercial teeth in the field,” in terms of “being willing to bear the consequences” of how that might impact business strategy and forecasts.
  • How compliance can not expect ‘zero tolerance’ to corruption risk while “demanding the same commercially.”
  • How compliance teams can’t “overnight click your fingers” and “expect people to change with the same commercial expectations.”

With respect to due diligence, Mr. Fenning explains:

  • How due diligence as a “piece of paper to show the regulators… drilled down to its cheapest outcome is worthless.”
  • How the “fig leaf of deniability will only go away when due diligence is used properly.”
  • How a risk-based approach to due diligence with “sensible criteria” allows organizations “to allocate diligence resources where they are most likely needed.”
  • How “purposeful, useful due diligence does not have to break the bank in the process.”

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Video: International Business Attitudes To Corruption: Part I

In the first of a two-part interview, Richard Fenning, CEO, Control Risks, addresses the Control Risks 2015/2016 Survey International Business Attitudes To Corruption (available here). In this Front-Line interview, Mr. Fenning addresses:

  • The challenges that compliance teams face in addressing the multitude of regulations across jurisdictions.
  • The importance of “tone from the middle” and the necessity of demonstrating to front-line teams that “good news can wait but bad news has to travel fast” when encountering corruption risk.
  • How compliance personnel need to understand that “local pressures and a corporate culture that has difficulties listening” can make for a dangerous compliance  combination.
  • The importance of eliminating the “disconnect between training and adequate practice” in preparing field personnel for the challenges that they will face in their work, and how that is not a “one size fits all” dilemma.
  • How those in forward positioned remote offices, often thinly supervised, might think that their conduct “does not seem so bad” in the context local cultures. Thus, the need for a speak up culture, as more than a whistleblower hotline, has never been more critical.
  • The need to understand local corruption risk up front, before entering a market, and that some markets might warrant walking away. In other words, “you can’t have it every which way.”
  • The complexities of local markets and how in some, you can do business in certain sectors, but not in others; however, even  in such markets, you will need to “worry about tomorrow even if it is going well today.”

Mr. Fenning’s view comes not from the Control Risks home office in London, but from his extensive travel and practice in the field, where he leads thirty global offices and focuses upon assisting multinationals in managing operational and strategic risk, even in the most volatile regions.  It is a fascinating interview, less than 20 minutes, with multiple lessons and recommendations for today’s commercial, audit and compliance teams.

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What Does Good Compliance Look Like?

What Does Good Compliance Look Like?

At a corporate summit, the CEO of a Fortune 500 company started his talk by asking “what does good look like?” Good question.

“Rules often inspire legalism and minimalism,” he said. “But  they don’t govern behavior.”  He shared that compliance personnel face the challenge of impacting and inspiring people outside their formal perimeter, yet who are part of their team. In organizational chart terms, that’s about influencing the dotted lines of reporting, not just the solid lines.

During 2015, my first full year engaged with the compliance community, I realized that the compliance focus is about helping and supporting those in the field, often in remote and thinly supervised offices. It’s about finding and strengthening the weak links.

I used to think, through the prism of my experience, that compliance was focused on ‘catching people doing bad things.’ But the ‘catching people’ moment, I now realize, is when all else fails. As the former poster boy for a tight control regime, I now understand and  respect those distinct compliance goals, even if they are intertwined in the same program.

So I started asking myself, how can I help and support?  I started with prison, which was an awful experience. The family and health consequences were disastrous. So I started to share my experience as a ‘tipping point’ for those who confront similar ethical dilemmas that I faced, and which ended with my incarceration. I hope that a real-world crucible invites others to avoid that outcome by embracing compliance as a partner to success.

As my 2015 progressed, I started encouraging people to speak up when they feel that success and compliance are competing ideas and goals, as opposed to strategic counterparts.  I encouraged them to ‘call home’ first, but also to call compliance.  I also challenged compliance personnel to look from within to see if there were any  ‘unspoken’ organizational messages or silos that might be causing confusion in the field.

I spent the better part of my career avoiding and evading compliance. But I now appreciate that compliance leaders want those outside of their perimeter to be successful, and they want them home with their families.

I no longer call compliance personnel the “bonus prevention” people.  I call them friends and colleagues. In my next blog, I’ll get back to ‘what does good look like,’ and invite your thoughts.

*For those of you who are looking for the remaining content of this blog, being accustomed to longer pieces, welcome to my New Years Resolution.  From now on, I will be stripping down my blogs to  the “barest bone.” (See Zinsser, On Writing Well)

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Whistleblowing: Awareness and Reluctance

Whistleblowing: Awareness and Reluctance

The following guest post is authored by Philippa Foster Back CBE, Director Institute of Business Ethics, link here.

What stops employees from blowing the whistle? Employees are a first line of defence in protecting companies from the risks of misconduct and corruption. Effective speak up or whistleblowing hotlines are an element of good governance, and can act as an early warning system for an organisation seeking to understand the issues which are being faced by its employees. But while most large companies have a formal mechanism where concerns can be voiced, the 2015 Ethics at Work survey by the Institute of Business survey shows that employees do not have confidence in the system.

The IBE has conducted a triennial survey into employees’ views of ethics at work in Britain since 2005. The survey was widened in 2012 to include France, Germany, Italy and Spain, giving additional insights into ethics at work in continental Europe.

The survey reveals that, although employees are now more aware of elements of an ethics programme than ever before, nearly half of British employees (45%) are not willing to raise their concerns about misconduct.  Of those that did speak up, the proportion who say that they were not satisfied with the outcome has doubled. 61% of those who did speak up say they were dissatisfied with what happened next (compared with 30% in 2012).

Across continental Europe, the picture is equally pessimistic:  fewer of those aware of misconduct raised their concerns (down to 44% from 51% in 2012).  Among those aware of misconduct, the most common reason across continental Europe for not raising concerns is ‘not believing that corrective action would be taken’ (26%). The two most prominent reasons given why British employees did not raise their concerns of misconduct in 2015 are: feeling that it may jeopardise their job and not believing that corrective action would be taken.  No respondents said that they did not know who to contact.

In stark contrast to when this question was first asked in 2012, the majority of respondents are now not satisfied with the outcome when they raise their concerns of misconduct. This appears especially to be the case for women, younger employees, and employees in organisations with an unsupportive ethical culture where 71%, 79% and 97% respectively said that they were not satisfied with the outcome.

Why have a Speak Up policy and procedure?

It seems that, in the rush for compliance in having a whistleblowing helpline, organisations are failing to understand or communicate the reasons and benefits of having one, and why they support and encourage reports or concerns.  A speak up procedure:

  • Protects the company  An effective Speak Up procedure encourages employees to discuss their concerns internally before going outside, either to the media or the regulator, and ultimately protects organisations from negative publicity. With developments in the internet and social networking sites, it is now easier than ever for employees to make their concerns public.  Most organisations may have been or will be the victim of a fraud or theft at the hands of their own employees; a mechanism for employees to speak up could help prevent such misconduct.   Furthermore, the value of whistleblowing is recognised with the Association of Certified Fraud Examiners reporting that it is one of the most effective ways to uncover fraud.
  • Protects employees A Speak Up policy sends a strong message to all levels that bad practice will not be tolerated. It can also reassure employees that their concerns are important, and encourage problems to be brought to the attention of management from within the company.

Effective Speak Up policies and procedures can protect employees from health and safety issues or bullying and harassment from of other members of staff.  A working environment in which it is made clear that bullying, harassment and discrimination will not be tolerated and where cases are actively dealt with,  leads to fewer payouts at employment tribunals.  Another benefit could be that good employees are retained with increased staff morale and loyalty. Perhaps the most compelling reason is that it makes for a happier and more productive workforce if they believe and see that a culture of mutual trust exists.

  • Protects customers and the public Customers and the public need to be protected from the effects of malpractice, for example, breaches of health and safety procedures or a failure to comply with hygiene standards.  Staff often have knowledge which if raised, may divert disasters when effective Speak Up procedures are in place.

Encouraging Speak Up

It is not enough to set up a phone line and hope for the best. In order to reap the benefits of an open culture, organisations need to ensure that their Speak Up procedures are effective. The biggest challenge is to make the speak up mechanism credible and safe.  Training managers and supervisors in how to handle concerns raised, ensuring that all concerns are acted upon, and any action (or inaction) reported back to the employee who raised a concern, can all help to encourage openness and discussions of ethical issues, before they become problems.

Employees need guidance to help them decide whether they need to raise a concern about something. A Code of Ethics which will help guide staff in their assessments of what is the ‘right thing to do’ in their workplace. Often gut instinct is enough, but sometimes behaviour can be so ingrained into ways of working as to not be considered unethical at all.  Offering employees decision-making tools, simple questions to help them test the ethics of a situation can also help:

  • Is it legal? Ask if unsure.
  • Would you be embarrassed if anyone found out about your decision?
  • How would you feel if you read about it in the paper?
  • Does it influence you in any way?

The IBE has developed a free App, the Say No toolkit, which provides the practical guidance needed to help to recognise a difficult situation and to do the right thing in response. The IBE Say No Toolkit has been designed to help employees have the confidence to make the right decision in situations which could lead to accusations of bribery.

The Toolkit targets common risk areas including when to accept a gift, when not to offer hospitality, what to say to avoid a facilitation payment and what to do if faced with a conflict of interest.  Employees can get the exact guidance they need because the Say No Toolkit can be tailored to reflect unique company policies and guidelines.

The fact that employees are aware of the mechanisms available to them to speak up, but have little confidence in the system,  may be a communication issue. If the  outcome of investigations is not fully communicated to the employee who made the call, then the word at the water cooler is that nothing is happening.

 But, this lack of communication  has a serious side effect. The result is a lack of confidence in the system, and mounting distrust in what the company says versus what it does. Employees take away the message that the motivation poster urging them to speak up is just window dressing, and this breeds cynicism, not just in the speak up process, but in the ethical values of the organisation itself.

If organisations have the courage to be open about the outcomes of raising ethical concerns, this can help give staff the confidence to share their concerns with each other and with the company.  It is time to recast the whistleblower as a hero – working for the good of the company, of colleagues and customers – and to be proud of those who have the moral courage to raise their concerns.

The 2015 IBE Ethics at Work survey is available from

The IBE Say No Toolkit is available here

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