Corporate Compliance and COVID-19: Necessary Bedfellows
Compliance departments are more important than ever in unstable times. Could they be a target for downsizing?
As the corporate world reels from COVID-19, risks are emerging from all corners of the business. Compliance departments, the lifeblood of corporate risk management, should be on high alert as never before — but whether they can remain staffed at current levels while other corporate priorities rise to the top is an important question.
In a recent FCPA Blog, Richard Cassin, the blog’s founder, contemplates whether the compliance department is “muscle or fat” as companies go into survival mode, increasing enterprise layoffs as the crisis deepens.
This is a significant question for C-suites to consider as they weigh benefits against risks in these turbulent times and attempt to project the look of the future landscape in their industries. COVID-19 will unsparingly leave its mark on everything, and trying to ascertain the actual risks related to known and potential threats will help clarify which corporate governance functions may need to be fortified.
For companies who’ve beefed up their compliance function for an anticipated M&A event, for example, cancellations or delays may necessitate cutbacks until the crisis fallout can be determined. The indefinite postponement of other risky ventures may have the same effect. But steering the corporate ship without a strong compliance function could lead to both inadvertent or deliberate non-compliant behavior that may have future downside consequences. Easing up on oversight now could prove disastrous.
Bad behavior is unlikely to abate at this time, and the crisis will likely open up other avenues of risk. Companies may now be taking the path of least resistance in several areas, opening up the possibility of corner-cutting, shortcuts, or the bypass of regular procedures in favor of getting things done quickly or get them done all. Relaxing quality controls to meet increased market demand, changing suppliers to keep things moving without appropriate vetting, potential bribery or corruption as supply chains shift, insider trading at a time of high market volatility, making donations to causes that could be suspect later—these are but a few examples of the heightened risks companies now face.
On the home front, in-house regulatory and compliance programs and policies likely face the stress of a displaced workforce. Enforcing compliant employee behavior, especially related to the movement and use of data and data sources across the enterprise, becomes more difficult as remote work creates additional barriers to getting things done. Privacy policies may be compromised for expediency as business pressures increase. In some cases, regulatory mandates that had not previously been top-of-mind for many companies may rise to the fore, such as OSHA regulations for a safe-working environment as companies struggle to remain both functional and virus-free during the crisis.
In contemplation of these risks, a team from Baker Mackenzie has set out some practical tips and actions in a recent article related to how companies can maintain ongoing compliance during these challenging times, tapping into these crucial categories: 1) Communication; 2) Oversight/Monitoring; 3) Technology; 4) Government announcements and rules; 5) Donations; 6) Supply Chains and Third Parties.
The Baker Mackenzie article is well worth the read for every company contemplating whether their compliance function is muscle or fat. A possible response may lie in the article’s title, which admonishes the following: “COVID-19: Don’t let your Compliance Program become another casualty of this crisis.” Whether companies are able to heed this advice remains to be seen.
Learn how H5 can help support the Compliance function in your organization. Contact us at email@example.com.