COVID-19 has gone far 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, businesses are likely to continue experiencing commercial stress, increased competition, and greater financial pressures from all their business partners. ‘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 organizations 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 have not always necessarily been given their usual weight around the crisis response table by some organizations, and businesses have had to embrace a higher level of risk-taking to accommodate for the special circumstances.
While organizations are re-adjusting to the emerging reality, it is important for their General Counsel to consider each of the following dimensions of the ongoing corporate compliance challenge and ensure that they are properly addressed in their organization’s continuation plan:
- External risk – in the last few weeks, many organizations have been experiencing a substantial increase in attempted fraud, 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 organization’s risk assessment, consider the current vulnerabilities that emerge in the new reality and ensure that the organization is equipped with proper measures to deal with those. It is preferable to move away from the ad-hoc, crisis management mind-set, and instead readjust 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 organizational culture. An environment of this kind encourages risk-taking behavior and sometimes blinds people’s minds to the 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 organizations, and that corporate controls are adjusted to identify and immediately react to red-flags.
- Compliance operations – many of the tools that Legal and Compliance functions 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, seeking 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 corporations will be scrutinized in two or three years from now, it is the responsibility of General Counsel to ensure organizations do not solve a current problem by creating a new one in the future.