2012 Canadian Centre for Ethics - EthicsCentre Canadian Centre for... · Evolve. Adapt. Lead....

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Canadian Centre for Ethics & Corporate Policy: Compliance & Ethics Program Best Practices

Andrea Falcione – Chief Ethics Officer & VP, Advisory Services

SAI Global Compliance (Americas)

February 29, 2012

Agenda

• Introductions

• Importance of a C&E Program

• Global Trends & Concerns

• Components of a C&E Program

2

Copyright 2012 | SAI Global, Ltd. All rights reserved.Copyright 2012 | SAI Global, Ltd.


• Building an Effective C&E Program

• Questions/Comments

� Multiple fully-staffed offices around the world

� Compliance Americas: 4 US locations

� Compliance EMEA: 2 UK locations

� Compliance Asia Pacific: 3 Australian locations

� 500 substantive clients, including 40% of the Fortune 100

companies, 30% of the Fortune 500

Introductions – SAI Global Compliance

3


companies, 30% of the Fortune 500

� Oversee programs across 120 countries and in over 60

languages

� In-house expertise in a full complement of advisory services,

adult learning, and technology integration

Introductions – SAI Global Compliance, cont.

• Team of lawyers, paralegals, data analysts & professional writers

• Certified Compliance & Ethics Professionals

• Consult on various aspects of client programs, including:

– Compliance- and ethics-related risk assessments

– Code benchmarking, commentary and re-writing

4


– Cultural assessments

– Assessment and remediation of conflicts of interest

disclosures

– Assessment of program effectiveness

– Training and communication benchmarking

– Conducting interviews and focus groups

Agenda

• Introductions




5





Importance of a C&E Program

Where Is the Pressure Coming From?

Law

Enforcement

Regulators

Rating

Agencies

6


Enforcement Agencies

NGOsInstitutional

InvestorsCustomers

&

Partners

Importance of a C&E Program, cont.

Why Do Compliance and Ethics Failures Pose a Big Risk?

7


NikoNikoNikoNiko Resources: Ottawa’s Resources: Ottawa’s Resources: Ottawa’s Resources: Ottawa’s

corruption test case corruption test case corruption test case corruption test case

SNC coSNC coSNC coSNC co----operating with RCMP operating with RCMP operating with RCMP operating with RCMP

investigation investigation investigation investigation

Canadian accused of bribing cabinet minister in India is a Canadian accused of bribing cabinet minister in India is a Canadian accused of bribing cabinet minister in India is a Canadian accused of bribing cabinet minister in India is a

test case for Canada’s foreign antitest case for Canada’s foreign antitest case for Canada’s foreign antitest case for Canada’s foreign anti----corruption law corruption law corruption law corruption law

Importance of a C&E Program – Costs of an Ethics Failure

Type 2:Investigative

Administrative

and audit Legal

Type 3:Loss of company reputation

Morale loss

DOJ/

regulator

Diminished

performance

Type 1:Fines and penalties

8


Corrective actions

Remedial

education Government

oversightEmployee

cynicism

regulator

scrutiny

Increased regulation

Fines and penalties

Loss of business

Agenda

• Introductions




9





Global Trends & Concerns

• Bribery and Corruption

– Increased focus worldwide on bribery and corruption

• Canada Corruption of Foreign Public Officials Act

• UK Bribery Act

• Foreign Corrupt Practices Act (FCPA)

• OECD Good Practice Guidance

– Enforcement activity continues to increase and costs for violations are

enormous

10


Source: Gibson Dunn, 2011 Year-End FCPA

Update (January 3, 2012 )

Global Trends & Concerns, cont.

• Whistleblowing and Reporting (US)

– U.S. Dodd-Frank Act

• Data Protection and Data Privacy (EU & NA)

– PIPEDA & Canadian Provincial Laws

– EU Data Privacy Directive

11


– EU Data Privacy Directive

– U.S. State Laws

• Securities Fraud and Insider Trading (US)

– “Expert Networks”

• Protection of Corporate Assets (Mexico)

– Intellectual Property

Global Trends & Concerns, cont. Increased Risk Beyond Corporate Boundaries

12


Risk Exposure

Corporation

Joint Ventures

Agents/Partners

Suppliers

Customers

Agenda

• Introductions




13





Components of a C&E Program, cont.

What Are the Key Elements of a C&E Program?

2

1

6

5Standards & Procedures

Tone at the Top & Tone from the Middle

Monitoring, Auditing & Reporting

Incentives & Discipline

14


3

4

2

7

8

6Tone at the Top & Tone from the Middle

Appropriate Program Structure

Education & Communication


Response & Prevention

Risk Assessment

What are the 3 items most critical to your compliance & ethics program’s success?

93

46 46 4350

75

100

There is clear unanimity and differentiation among the choices

Percent (%

)Components of a C&E Program, cont.

15

43

17 15 12 14 110

25Percent (%

)

Source: 2011 SAI Global Client Benchmarking Survey


BIG PICTURE = has your organization established compliance standards and procedures that are designed to

prevent and detect unethical and/or criminal conduct?

Standards & Procedures

16


Assess:

√ Breadth, depth, and usability

√ In relation to your industry, size, complexity,

and business functions

Policies are updated frequently and are a time-consuming part of the job - but controls may be

lacking

How do you communicate and manage policies?(% of respondents)

Annually44%

Every 2 yrs22%

Every 3 yrs11%

Not routinely23%

Review and/or Update Policies

Components of a C&E Program, cont. 17

Distribute

Confirm understanding

Monitor compliance

Review

Update

vs. what will regulators expect?

99%

63%

25%11%

Posted on the intranet

Communicated via email

Distributed via a learning

management system

Tracked via a learning

management system

(% of respondents)



Tone at the Top & Tone from the Middle

BIG PICTURE = Does your company’s senior and middle management “talk the talk” and “walk the walk?” Do managers

demonstrate support of the program?

18


Assess:

√ Substance, visibility & sincerity

√ Program driven by local leaders

√ Management responsibility for employee participation in

program


Appropriate Program Structure

BIG PICTURE = is your Board of Directors knowledgeable about, and does it oversee, your company’s C&E program? Is

a member of high-level personnel charged with overall

responsibility for your company’s C&E program?

19


Assess:

√ Visibility and oversight of program at the highest levels of the organization

√ Structure of, and resources available to, C&E department

√ Compliance Committee(s) including other business unit leaders (e.g., HR,

Legal, Audit)


Education & Communication

BIG PICTURE = does your company require appropriate C&E education, and does it communicate, at all levels?

Assess:

20


Assess:

√ Annual, proactive plan

√ Broad audience

√ Appropriateness to individuals’ roles and

responsibilities

√ Frequency and updates

√ Records of participation


Every 2 yrs2%

AnnuallyIt's

Frequency of C&E training

Every 3 yrs6%

Every 2 yrs26%

With updates11%

Other 7%

Frequency of Code online training

21

Annually30%

Twice a yr5%

Quarterly16%

It's ongoing47%

26%

Annually50%


3-7,000 (24%) 7-15,000 (16%)

15-50,000 (20%)

>50,000 (13%)

Size of Business vs. Time Spent on Training/Employee

$1 - 5 B

$5 - 12 B

$12 - 25 B

> $25 B

<1 hr

1 - 2 hrs

2 - 4 hrs

Time spent by each

employee on C&E training

Global Revenue (USD)

22

0 10 20 30

< $500 M

$500 M - 1 B

2 - 4 hrs

> 4 hrs

% of all respondents

12% 29% 36% 23%

0 25 50 75 100

TOTAL

Almost 60% of clients train > 2 hrs/year/employee



Monitoring, Auditing & Reporting

BIG PICTURE = has your company implemented and publicized a reporting system designed to detect unethical and/or criminal

conduct?

Assess:

√

23


√ Anti-retaliation measures

√ Anonymity &confidentiality

√ Communication of limitations

√ Publicize & market

√ Periodic evaluation of program effectiveness



BIG PICTURE = does your organization enforce its C&E standards by using appropriate incentives and

disciplinary measures?

Assess:

24


Assess:

√ On a case-by-case basis

√ Enforcement & reinforcement consistently & at all levels

√ Integrate C&E factors into leadership development,

employee evaluations &

promotions, rewards &

recognition


Response & Prevention

BIG PICTURE = does your company respond in a reasonable and appropriate manner to instances of unethical and/or

criminal conduct?

25


Assess:

√ Responses designed to prevent further, similar

criminal conduct

√ Modification of program, if necessary


Risk Assessment

BIG PICTURE = does your organization periodically assess its risk of unethical and/or criminal conduct?

Assess:

26


Assess:

√ Design, implementation, or modification of program to

address identified risks

√ Periodic risk prioritization

√ Dynamic process involving self-review & evaluation

Tools used in risk assessment process

0102030405060

% of respondents


27

0


Risk Assessment Frequency

0%

20%


28

20%

40%

60%

80%

100%

Annually

Every 2 yrs

Every 3 yrs

Never

Not routinely

Most frequently assessed areas are: bribery & corruption; ethics &

corporate culture; financial integrity; gifts & conflicts of interest;

and health, safety & environmental protectionSource: 2011 SAI Global Client Benchmarking Survey

Agenda

• Introductions




29





Building an Effective C&E Program

30

• Set clear, long-term program goals

• Make critical program requirements mandatory

– Follow through on requirements

• Brand and market the program

Practical advice for program success:


• Brand and market the program

• Treat C&E education as both a cultural initiative and

professional development, rather than as “training”

• Continually assess risk and employee attitudes using

multiple vehicles

• Utilize shorter, more frequent compliance periods to

maintain a continuous level of awareness

Building an Effective C&E Program, cont.

31

• Utilize multiple communication vehicles to keep level

of awareness high (courses, communication tools,

marketing events, posters, newsletters, company

meetings, etc.)

Practical advice for program success:


meetings, etc.)

• Solicit feedback on program

• Celebrate doing the right thing at all levels of the

organization

• Report back to employees regarding status of

program, critical decisions that have been made,

ethical health of organization, etc.


32

• Recognize that cultures, laws, practices,

etc. may vary across the company

• Utilize Code of Conduct education to help

develop a unified culture and consistent

Common globalization issues:


develop a unified culture and consistent

values across the company

• Ensure program is relevant to each

geographic area

• Address language and technical issues

• Identify key contact(s) in each geographic

area to assist with program rollout and

management


33

Measuring program success:

Objective Measurement Examples

- C&E training statistics

- Hotline calls/issues raised (number and nature)

- Attendance and participation in company events and


- Attendance and participation in company events and programs

- Lawsuits, administrative actions and complaints

- Instances of ethical leadership, behavior that are rewarded

- Performance evaluations

- Recruiting success

- Employee retention


34

Measuring program success:

Subjective Measurement Examples

- Management participation and sponsorship of Code, C&E Program


- Employee exit interview data

- Feedback/suggestion, participation in vehicles/events for improving organization

- Employee surveys, focus groups & interviews

How do you determine C&E program effectiveness?

Qualitiative reporting

Assessment of organizational culture

Employee disclosures

Litigation

Random or regular audits of risks

% of Clients Who Use Each Measure


35

0 20 40 60 80 100

Training completion rates

Hotline data

Follow-on testing

Exit interview data

Case/incident mgmt data

Internal investigations data

Qualitiative reporting

>50% of clients<50% of clients


To whom do you communicate ‘effectiveness?’

50

60

70

80

We communicate to senior management

We communicate to the Board


36

0

10

20

30

40

50

We don’t communicate effectiveness

We communicate to employees


Agenda

• Introductions




37





Questions/Comments

38

ANDREA FALCIONE, JD, CCEP

51 Sawyer RoadSuite 510Waltham

Chief Ethics Officer & VP Advisory Services

Compliance Americas

[email protected]/compliance

WalthamMA 02453

+1 781 891 9700 M+1 781 398 3524 D+1 781 891 9701 F

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