FCPA: Integrating Your Compliance Risk: Where the Rubber Meets the Road

In listening to companies discuss compliance in the areas of anti-corruption under the Foreign Corrupt Practices Act (FCPA), anti-money laundering (AML) or export control, one of the things that has consistently struck me is how siloed each of these groups invariably is within their company.

Not only does this deny a company the ability to share a wide variety of talent and experiences, it can lead to the concept of what authors Robert Kaplan and Annette Mikes call the “functional trap” of labeling and compartmentalizing risk. In an article in the June issue of the Harvard Business Review, entitled “Managing Risks: A New Framework”, they declare that good risk discussions must be integrative in order for risk interaction to be evaluated. If not, a business “can be derailed by a combination of small events that reinforce one another in unanticipated ways.”

The authors posit that it is difficult for companies to accurately and adequately discuss risk for a variety of reasons. One of these reasons is the aforementioned silo effect which can lead to a lack of discussion by a wide group regarding a number of risks, for example compliance risk; reputational risk; brand risk; credit risk; human resources risk are but a few of the types of risks mentioned in their article. The authors believe that one of the ways to knock down these silos when it comes to a more complete management of risk is to “anchor their discussions in strategic planning, one integrative process that most well-run companies already have” in place.

I. VW do Brasil Risk Management Strategy

The authors cite to the example of Volkswagen do Brasil (VW) and the techniques used by its risk-management unit. Initially, the VW risk management unit uses the company’s overall strategy map as a starting point for internal discussions around risk ...

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