For this Friday’s offering I thought a bit of a potpourri was in order. However, before I get there, I wanted to acknowledge two significant passing’s this week. The first was Richard Cole; the second Charles Van Doren. They provide a stark contrast as twin perspectives of the American character.

Richard Cole was the final member of James Doolittle’s group involved in the air raid on Tokyo in World War II (WWII). According to his New York Times (NYT) obituary, he was “Doolittle’s co-pilot in the lead plane of a storied mission in the history of American air power”. Cole was 103 at the time of his death and “the last survivor of the 80 Doolittle raiders, who carried out America’s first strikes against the Japanese homeland in World War II.” The raid began on the morning of April 18, 1942, when 16 Army Air Corps B-25 bombers flew off the aircraft carrier Hornet from a point more than 650 miles offshore to Japan. It was a low-level daylight attack that resulted in only light damage to military and industrial targets. But it buoyed an American home front reeling from unbroken reverses in the Pacific, beginning with the Pearl Harbor attack on Dec. 7, 1941, and it shattered the Japanese government’s assurances to its people that they were invulnerable to an American air attack. It was one of the most memorable stories in US aviation history.

Our second passing was of a person, Charles Van Doren, who achieved significant fame for a much more ignoramus reason. Van Doren came from a storied family. His father and uncle were Pulitzer-winning authors and his mother a novelist and editor. Van Doren himself was an Instructor at Columbia University. He was a top participant in the game show 21. According to his NYT obituary, after his meteoric rise in the game show to its top winner, he “walked away with $129,000 in winnings (the equivalent of more than $1 million today). He had also appeared on the cover of Time magazine, received some 20,000 fan letters, brushed off dozens of marriage proposals and signed a $150,000 contract to appear on NBC shows for three years.”

His fall came from his participation in the quiz show scandals of the late 1950s where some of the top TV game shows were found to be rigged with selected participants being given the answers to questions beforehand. Van Doren’s fall came when, after having lied to a state of New York Grand Jury, he admitted before Congress that the game shows were rigged and he had been wrongfully provided answers before the questions were asked on air. Van Doren never publicly accepted his responsibility for this massive fraud, only stating “I would give almost anything I have to reverse the course of my life in the last three years”. According to his obituary, “he had agonized in a moral and mental struggle to come to terms with his own betrayals.”

I was recently commissioned by Hanzo to digest and process new information from Q1 2019 on the state of compliance, compliance programs and regulatory enforcement; distilling it down to some key themes over a few pages that you can read and learn from during your next commute to work or in between meetings. The result was an eBook, entitled “The Q1 2019 Compliance, Risk, and Regulations Research Roundup”, which I co-wrote.

I considered the World Economic Forum (WEF) “The Global Risks Report 2019” and what it meant for compliance professionals and risk managers from a macro perspective. This report laid out risks in several categories, including political and geopolitical, technology, economic and environmental risks. These risks all interrelate and their solutions inter-play, requiring a level of intelligence, leadership, and cooperation not currently seen on the world political stage. It will fall to business leaders, including compliance professionals, who, through commerce, will have to address, mitigate and manage these risks as governments have abandoned their traditional leadership roles. I also considered risk from a much more micro perspective through an exploration of the Allianz Risk Barometer – Top Business Risks For 2019, which is designed to articulate the corporate risks for this year and beyond based upon a survey of over 2,400 risk management experts. It supplements the WEF Report by drilling down to a lower strategic and tactical level for many companies to consider their risks going forward.

In the area of regulatory enforcement, I considered issues around the Foreign Corrupt Practices Act (FCPA) enforcement through speeches by current and former Department of Justice (DOJ) officials, which focused on companies working with the DOJ through self-disclosure and cooperation and the renewed push against individuals. The Securities and Exchange Commission (SEC),  which enforces the FCPA’s Accounting Provisions and is focusing more on effective internal controls. Finally, is the area of Financial Industry Regulatory Authority (FINRA) enforcement and what it might mean for public non-regulated companies down the road.

Outside of these areas of compliance, when was the last time you looked at your cybersecurity policies both from data privacy/data protection perspective? How about from the notice and remediation perspective when a breach occurs (not if, but when)? If you are doing business in the European Union (EU) or United Kingdom (UK), there is the very short notice provision so are you ready? Additionally, does your company fall under the new California 2020 privacy law? How much training has your organization done around its data privacy and data protection policies and procedures? These are all questions the regulators have been asking companies and you need to get ready for them.

In the area of compliance going forward one of the most significant developments has been the demonstration of the positive financial impact of compliance programs. Ethisphere Institute Chief Executive Officer (CEO) Tim Erblich has statedthat this year’s honorees of Ethisphere’s World Most Ethical company designation “outperformed the large cap sector over five years by 14.4 percent and over three years by 10.5 percent. We call this the “Ethics Premium.”” On a more tactical level, Dr. Kyle Welch, Assistant Professor at George Washington University, released an academic paper, co-authored with Stephen Stubben, Associate Professor from The University of Utah. In it, they demonstrated, that companies with a robust whistleblower and reporting system had greater profitability and workforce productivity as measured by Return on Assets (ROA), there were fewer material lawsuits brought against a company overall, and there were lower settlement costs if a lawsuit did occur. Finally, there were fewer external whistleblower reports to regulatory agencies and other authorities.

These areas are but the highlights of the Hanzo eBook. The Hanzo team added several other sections on regulatory recaps and where things might be going between the SEC and Elon Musk. The entire work is chocked full of diagrams, charts and insights. I know you will find it useful.

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© Thomas R. Fox, 2019