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FCPA Compliance Report

Tom Fox has practiced law in Houston for 30 years and now brings you the FCPA Compliance and Ethics Report. Learn the latest in anti-corruption and anti-bribery compliance and international transaction issues, as well as business solutions to compliance problems.
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Sep 20, 2017

How can you change the perceptions around compliance in your organization? With the Justice Department requirement, set out in the Evaluation of Corporate Compliance Programs, to more fully operationalize your compliance program, do you as a CCO struggle with operations buy-in? I thought about those questions and others when I read an article in the MIT Sloan Management Review, entitled “Learning the Art of Business Improvisation, by Edivandro Carlos Conforto, Eric Rebentisch, and Daniel Amaral. In this article the authors explore the issue of improvisation and write that while it “may seem to be spontaneous, but managers can foster it in innovation projects through the deliberate development of certain processes and capabilities.” For what improvisation really comes down to is the ability to “create and implement a new or unplanned solution in the face of an unexpected problem or change.” 

Compliance is certainly one area that requires such flexibility because of the ever-changing business conditions that exist in today’s multinational organizations subject to the Foreign Corrupt Practices Act (FCPA). Novartis announced its South Korean subsidiary was under criminal investigation for allegations of paying bribes to physicians, this less than 60 days after agreeing to a FCPA enforcement action which involved payment of a $25 million dollar fine for the actions of its Chinese subsidiaries. 

Whether deliberately or not, compliance must improvise. Such compliance “Improvisation can foster problem solving, creativity, and innovation, and it is becoming a requirement for many organizations. Although improvisation might seem to be spontaneous and intuitive, to do it well requires the development of disciplined and deliberate processes and capabilities. Managers working in dynamic, fast-paced, and highly innovative project environments should develop and refine capabilities in these three areas to create a project environment that will enhance a team’s improvisation competencies - ultimately with an eye toward improving project results and innovation.”

There are three general areas which a company can improve upon to help advance its abilities to adapt and change. They are (1) Build a culture that recognizes and views changes positively. (2) Create the right team structure and project environment. (3) Provide management practices and tools that facilitate improvisation. 

Under this first prong, innovation can come from teams that have a “positive attitude toward dealing with and accepting ambiguity and project changes.” Not surprisingly, this does not come from top down leadership but allowing “higher level of autonomy in making decisions.” Further, the farther out from the corporate office, the more “teams should be empowered to make decisions locally, be informed about and willing” to take make changes and provide enhanced compliance risk management, and not overly fear potential failure. 

Clearly the ability to make changes requires a robust compliance regime to begin with. However, having such a system in place, particularly through internal controls, allows a compliance department to “help them to reduce uncertainty more quickly and effectively learn from their experiences. Teams equipped with a broad array of tools and techniques can use them to respond to different types of challenges. The focus should be on helping teams anticipate and recognize changing circumstances and make more rapid and accurate decisions.” 

The second prong ably demonstrates that a key to making improvisation work is that you have good communication between the compliance function and business unit. This is not a new concept and communications runs two ways. If the business unit sees the Chief Compliance Officer (CCO) as Dr. No from the Land of No, they will not likely be calling for assistance. Yet compliance does not always know what business opportunities arise without that information so they cannot craft appropriate risk management solutions. Weekly interactions between leaders and key stakeholders are good first step. 

Perhaps counter-intuitively, the authors also note that smaller teams appear to have more and better success. The “greater levels of improvisation in smaller teams that displayed more self-directing and self-organizing characteristics, such as being responsible for monitoring and updating the status of their activities and deliverables.” This can allow the compliance department to play a key oversight and support role “on the aggregated information and on more strategic issues related to the project.” 

Under the final prong, it is shown that “teams with greater improvisation characteristics were more likely to use agile management approaches, techniques, and tools. In fact, teams that embraced an agile approach were nine times more likely to have high levels of improvisation compared with teams that used a more traditional (waterfall) approach.” This means that not only will a command and control structure not be able to move as quickly and efficiently but also you need to operate at a level of sophistication beyond simply spreadsheets. 

Moreover, “The agile methods we observed in the teams with higher levels of improvisation included iterative development, supported by recurring delivery of higher-value deliverables; constant interactions between stakeholders and the project team; the use of visual tools to collaboratively manage the project with team members; and active involvement with the client and/or user in the development process.” 

The ability to be agile is an important component of any best practices compliance program. The need to respond to business changes is always paramount. Yet there is no end to the variety of corrupt schemes engaged in by company employees. The Novartis matter in South Korea allegedly involved bribery through excessive payments for articles published in medical journals. Just as the bribery and corruption scandals involving GlaxoSmithKline PLC (GSK) and others in China demonstrate new and creative ways to put pots of money together to pay bribes, the Novartis issues may show another area that bears compliance scrutiny. A compliance function must be ready to adapt.   

Three Key Takeaways

  1. Whether deliberately or not, compliance must improvise.
  2. Improvisation may seem spontaneous, but managers can foster it in innovation projects through the deliberate development of certain processes and capabilities
  3. Work to have the changes seen as a positive in your organization. 

This month’s podcast series is sponsored by Oversight Systems, Inc. Oversight’s automated transaction monitoring solution, Insights on Demand for FCPA, operationalizes your compliance program. For more information, go to OversightSystems.com.

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