Three dimensions of adjustment to the new reality
COVID-19 has long gone beyond creating a temporary crisis. It is a game changer. The major hit suffered by the global economy due to the pandemic is leading to a serious, global recession. In the near future, we are likely to continue experiencing commercial stress, increased competition, and greater financial pressures by all business partners. Our ‘money-maker’ business teams are likely to face enormous pressure on bottom lines, while business enabling teams, like Legal and Compliance are expected to cut their budgets and reduce their operations to ‘essential only’ tasks. All that is coming while we continue facing substantial social and cultural shocks of remote working and social distancing. Times are certainly changing.
For obvious reasons, many organisations in the last few weeks have been led and operated in a crisis management mode. Priority has often been given to health and safety issues, continued operations, secured liquidity and sustainable supply. Legal and Compliance considerations were not always getting their usual weight around the crisis response table, and the business had to embrace a higher level of risk-taking to accommodate for the special circumstances.
While the organisation is re-adjusting to the emerging reality, it is important for General Counsel to consider each of the following dimensions of the ongoing corporate compliance challenge and ensure that they are properly addressed in the organisation’s continuation plan:
- External risk – in the last few weeks many organisation have been experiencing a substantial increase in fraudulent attempts, cyber-attacks, money laundering and anti-competitive initiatives. Many of the third-parties out there appear to abuse the unusual situation by seeking to make easy money. It is therefore important to renew the organisation’s risk assessment, consider the current vulnerabilities that emerge in the new reality and ensure that the organisation is equipped with proper measures to deal with those. It is preferable to fade away from the ad-hoc, crisis-management mind-set, and instead re-adjust the corporate protocols and procedures to ensure adequate responses to the evolving risks.
- Internal risk – the new environment of increased pressures on bottom lines and operations in ‘urgency mode’ may affect the organisational culture. Environment of this kind encourages risk-taking behaviour and sometimes blinds our own people’s mind to more dishonest nature of their own actions. A ‘do whatever it takes to save the business’ environment, may bring even ordinary employees to succumb to the temptation and enter the grey zone without noticing that they are actually deviating from the corporate big-picture interest. Hence, Legal and Compliance leaders must ensure that compliance considerations are incorporated into the continuation plan of the organisations, and that corporate controls are adjusted to identify and immediately react to red-flags.
- Compliance operations – many of the tools Legal and Compliance traditionally use to address compliance risks, such as face-to-face trainings, interviews, dilemma sessions and compliance reviews, are now not available in their regular format. Legal and Compliance teams are necessarily required to reinvent themselves, seek innovative channels of communications with internal and external stakeholders to ensure they continue supporting the business while limiting the risks of non-compliance.
A prudent adjustment of the corporate risk and compliance management system seems important today more than ever before. Taking into account that the actions of our corporations will be scrutinized in two or three years from now – it is the responsibility of General Counsel to ensure our organisation does not solve a current problem by creating a new one in the future.
About the authors:
Sharon Oded (email@example.com) is Regulatory, Compliance and Investigations partner at Norton Rose Fulbright LLP, Amsterdam and Professor at Erasmus University Rotterdam, and Regulatory, Compliance.
Britt van Breda (Britt.vanBreda@nortonrosefulbright.com) is Regulatory, Compliance and Investigations associate at Norton Rose Fulbright LLP, Amsterdam.