ZURICH: Help Point Perspective
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.
March 1, 2013
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