My heart and thoughts continue to go out to my fellow Houstonians and Texans affected by the cold snap of 2021. For those of us who thought 2021 might bring more sanity than 2020, we have experienced the first armed attacked on the US Capital since the War of 1812; the biggest financial bubble in the US since the Panic of 1907 and now, at least in Texas, the worst winter since 1895. I can hardly wait to see what the next 10+ months bring us.
Since about all I am thinking about now is when will electricity be restored to regular service, when the City of Houston will have water service back (Friday at this point) and when it will get back above 32 degrees, I thought I might continue my exploration of weather-related themes from which the compliance practitioner can learn and use in a best practices compliance program going forward.
We live behind a man-made pond and today fog was coming off the water like I had never seen before. It was rising up and then blowing across the water to obscure the far side of the shore. It seemed an apt metaphor for Houston and the state of Texas today, so I might consider fog and its use as a literally symbol that we simply cannot see very far right now for the fog. If one were to think of one scene involving the city of London up to about 1950, it would most probably involve fog. More particularly, it would be what is generally known as ‘pea-soup’ fog. In almost any movie ever made, featuring Victorian to mid-20th century London, the overwhelming motif was all-encompassing fog. The same holds true for literature and the vision in Houston and the state of Texas today.
Today’s compliance connection is the root cause analysis. From a through root cause analysis of Doyle’s writings, it is clear fog is a not a major player in the tales or even a mood or scene motif in the Sherlock Holmes stories. This revelation ties directly into the concept of a root cause analysis that was set out in the Department of Justice’s (DOJ’s) 2020 Evaluation of Corporate Compliance Programs (2020 Evaluation), which stated Prosecutors should “any remedial actions taken by the corporation…including measures to identify future risk”.
Under the section entitled “Analysis and Remediation of Underlying Misconduct”, in the paragraph entitled Root Cause Analysis, it posed the following questions: What is the company’s root cause analysis of the misconduct at issue? What systemic issues were identified? Who in the company was involved in making the analysis?
A root cause analysis is a method to learn more about your business process and what occurred so that the controls, systems and process can be remediated. A root cause analysis allows you to determine the true cause of an incident, not one that simply hypothesizes a bad actor within a company going rogue. If you just fire someone, without changing the process, you are going to keep getting similar or the same results. Assessing blame does not help, as you want to get deeper into those root causes. The reason the entire process is named ‘root cause analysis’, is to emphasize the need to drill down below the superficial pieces of the framework to fix, and into the things that are driving the outcomes and the behaviors.
As Mike Volkov has noted, “Companies often face situations where they discover misconduct, impose discipline and remediate the problems discovered and then move on. This happens more often than misconduct resulting in a government disclosure or a government investigation. In either case, the questions are certainly relevant. The questions appear to be fairly basic but depending on the circumstances can be deadly accurate in pointing out compliance deficiencies. A root cause can implicate not only employee misconduct or failure to exercise proper oversight, but can extend to such issues as a company’s culture, tone-at-the-top and other issues with significant implications for the company’s operations.”
When root cause analysis is done correctly and utilized as a part of your remediation strategy going forward, it principally is there in order to develop preventive actions. A preventive action is something to prevent recurrence of the problem. You can correct with a corrective action, but the ultimate goal is to engineer out or fix the system and processes so you do not have the opportunity for that flaw to occur again.
Ben Locwin put it another way, stating “We have a problem. Let’s not run away from it. Let’s embrace it.” What you are really doing is looking at your program from the inside out. Locwin advocates beginning with such questions as “What can we do better? What can we do next?” He went on to explain “you’re looking for examination from an external and not an internal prospective. Internal perspectives tend to follow along the quotas. If you always do what you always did, then you’ll always get what you always got.” He went on to say, “continuous improvement approaches benefit most from” its “frequent exposures to radical change.”
It is the willingness of a company to look at itself that is the key to continuous improvement. Locwin said that while “typically these things come from external pressures and not from internal, incremental changes. If you take a step back, or maybe several steps back to say, what are we actually trying to do, and are we reaping the value that we’re intending to get out of what we have. If we’re not, then we should look for this really systemic overhaul of things, and not just try to tweak a little thing here and a little thing there.”
A root cause analysis can be used to strengthen the prevention prong of your best practices compliance program. Thinking of the proper manner to use a root cause analysis, to find facts and not assess blame will take your compliance program to an entirely higher level of proficiency. If the DOJ ever comes knocking you can demonstrate your adherence to the suggestions put forth in the Evaluation in a documented manner. I find the confusion of fog as a mood setter an excellent way to think about a root cause analysis.
To all blog-readers, friends and compliance colleagues who have reached out to me; I give my humblest thanks. Some folks have made donations to the Red Cross to help provide such basics as blankets and bottled water to my fellow Texans in need. My most heartfelt thanks.
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© Thomas R. Fox, 2021