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Better to create a level playing field first, then talk about who exactly is out of bounds.

By Dan Reynolds is managing editor of Risk & Insurance®


Those who would enforce U.S. laws against U.S.-based companies operating overseas without taking the same measures against their global competitors are creating an uneven playing field, one that is stacked against domestic businesses.

In an ideal world, every company that participates in this global economy would be subject to the same rules. But anyone with business experience knows this isn't the case. Environmental and human rights regulations that are respected and followed in this country aren't even in place in others. Think about the cost of compliance U.S.-based companies face but which many of their competitors don't. Do we really want to add to this burden?

The U.S. steel and auto industries have had to fight fiercely against protectionism and product dumping from government and manufacturing alliances in other countries. In those industries, it takes ongoing diplomatic help from our government just to keep the markets remotely fair.

The same diplomatic safeguards should be in place for directors and officers accused of wrongdoing in foreign lands, whether the allegations involve the Foreign Corrupt Practices Act of 1977 or the Dodd-Frank regulations of 2010. Enforcement activity for the Foreign Corrupt Practices Act is at an all-time high, according to a recent report. Enforcement actions initiated by the Department of Justice and the SEC in 2011 were "the second most prolific year in the history of FCPA enforcement."

In light of the fact that our businesses and executives are already playing on a mismatched field, is this sort of aggressiveness on the part of our government really an appropriate measure? I say it's too much and is overtly anti-business.

Businesses create jobs, and pay taxes. You'd think Washington, D.C., writhing in its own budget misery, would see the wisdom in not overly curtailing business. Whistleblower provisions of Dodd-Frank are going make things hot for directors and officers for some time. I say some measure of realism is in order and that regulators back off.

Fair and ethical business practices are in everyone's interest.

But until everyone's playing by the same rules, it is destructive for the U.S. government to be so heatedly aggressive in the enforcement area, especially on U.S. business practices overseas.

Lawmakers, take corporate corruption seriously and enforce the laws we already have on our books.

By Cyril Tuohy, managing editor of Risk & Insurance®


Other than lawyers, perhaps, hardly anyone would argue in favor of more laws. But nearly everyone can agree that what we need is to enforce the laws that are already on the books, whether they be criminal or civil laws, or regulations adopted to implement the laws.

One of those laws is the Foreign Corrupt Practices Act of 1977. Another is the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The FCPA is short and straightforward, and its provisions apply to all companies reporting to the SEC.

Dodd Frank is more voluminous, and was passed in the wake of the Great Recession where we all nearly lost our shirts because of the recklessness of a few. The spirit of both laws to the make the goings-on in companies fair and transparent; that way we all benefit.

What we need is swift enforcement of these laws. If that means beefing up the enforcement divisions of the SEC or the Treasury Department, so be it. A single Pentagon weapons program could fund a platoon of white-collar enforcement officers for a lifetime. Understaffing on account of budgets isn't the real issue.

If companies don't agree with the fines and charges, there is an appeals process for that as well.

Companies need to take these laws seriously and comply with them, which they will necessarily do if our government enforces the laws. Strong compliance is a necessary component for all companies as well. A solid record reassures investors, management, employees and customers. Adhering to best compliance practices is its own risk-management reward.

If corporations want relief, they have the clout to push for change. They don't need to circumvent laws.

Critics of the lawmaking-process regularly refer to laws as "Swiss cheese," in reference to the number of loopholes in the law ripe for exploitation. U.S. companies have always been able to compete successfully in the domestic or global marketplace; our free -market system almost guarantees it. Things go awry when the rules don't apply equally to everyone in the ring, domestic or global.

That's why we need to enforce the laws already on the books, and why companies need a robust compliance strategy, even if we all have to pay a little bit more.

Effective Policies and Practices Protect Against Regulatory Risk

By Michael Karmilowicz is Head of Management Solutions for Zurich in North America


The anti-bribery provisions of the Foreign Corrupt Practices Act (FCPA) are a good example of the increasing risk and liability that global companies face today. FCPA actions by the SEC have dramatically increased since 2010: the number of FCPA enforcement actions grew by 85 percent from 2009 to 2010, according to Kroll Advisory Solutions.

Companies paid a record $1.8 billion in financial penalties in 2010 to the U.S. Department of Justice and the SEC. Beyond immediate, severe legal penalties, the implications of these kinds of risks are also strategic -- what is the impact on a company's reputation if convicted of violation of the bribery statutes, for example?

Risk management can help make the organization aware, at a fundamental level, of the complexity of regulatory and compliance risk. Strategic risk management can help identify the key factors, within the competitive environment, that affect the way the organization can both transfer a portion of the risk and implement compliance policies and best practices. A financially strong global insurance carrier can help develop appropriate coverage and provide suggestions about effective policies and practices.

Nearly three-quarters of the compliance officers in the Kroll report said that robust compliance policies can give a company a competitive advantage. Prosecutions and investigations are costly and take away from developing business. That's not a risk easily insurable.

In this regulatory environment, it's even more important that companies have effective training programs in place throughout the organization, with a special focus on board members. Such training is far more common, especially as the cost of judgments and settlements have escalated as the risk has increased.

In the current competitive business environment, it falls to management to devote the needed resources to become vigilant on compliance. Risk managers can be the catalyst for the entire organization, helping to instill a culture of awareness and integrity.