Many chief compliance officers and compliance practitioners struggle with metrics to demonstrate revenue generation. Most of the time, such functions are simply viewed as non-revenue-generating cost drags on business. This may lead to compliance functions being severely reduced in this downturn. I believe, however, such cuts would be far from short-sighted; they would actually cost energy companies far more in the short and long term.
In an economic downturn, I see two increasing compliance risks for companies. The first is that companies will attempt to reduce their costs by cutting their compliance personnel. A tangent but equally important component of this will be that companies that do not invest the monies needed to beef up their oversight through monitoring or other mechanisms are setting themselves up for serious compliance failures. Moreover, what will be the pressure on the business folks of such companies to “get the deal done”? Further, if there is a 10 percent to 30 percent overall employee reduction, what additional pressures will be on those employees remaining to make their numbers or face the same consequences as their former co-workers?
I think both of these scenarios are fraught with increased compliance risks. For companies to engage in behaviors as I have outlined above would certainly bring them into conflict with the Ten Hallmarks of an Effective Compliance Program as set out in the 2012 FCPA Guidance. For instance on resources, the 2012 FCPA Guidance does not say in a time of less income, when your compliance risk remains the same or increases, you should cut your compliance function. Indeed, it intones the opposite, when stating, “Those individuals must have appropriate authority within the organization, adequate autonomy from management, and sufficient resources to ensure that the company’s compliance program is implemented effectively.”
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