One of the hottest topics of 2017 was cryptocurrencies. The blockchain-derived digital currencies such as Bitcoin, Ethereum, and Ripple were the subject of seemingly endless interest and speculation, in both the media and the markets. In an excitement reminiscent to many of the dot-com boom, cryptocurrency companies rushed to become issuers via initial coin offerings (ICOs). Companies that were previously unrelated to blockchain or any product of the technology changed their names or indeed their entire operational purposes to attract market interest. Investors searched for information and guidance, experimented with the digital currency as both a payment service and a securities holding, and filled social media and dinner table conversation with curiosity and enthusiasm for the disruptive potential cryptocurrencies hold for banking, technology, and the markets.
Tag: culture of compliance
Retraction Watch is a blog that started in 2010 with the objective of publicizing, studying, and contributing to the investigation of retractions in scientific journals of academic research and writing. The validity of academic papers is often held to a vaulted status because of the famed system of vetting through peer review and editorial boards before publication. Identifying mistakes in this context, then, whether through inadvertent technical errors, minor or major, or some intentional misrepresentation or fraudulent conduct, is an interesting and necessary practice in order to uphold academic integrity.
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Happy Martin Luther King Jr. Day!
Happy Martin Luther King Jr. Day from Compliance Culture!
In honor of the holiday, please check out the below selections from some sermons and speeches delivered by Dr. King which are especially pertinent to ethics and morality. These profound and incisive words can inspire not just spiritual and philosophical observations, but are also useful to consider in formulating individual and organizational values and cultural identity.
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This week on Compliance Culture
Be sure to visit Compliance Culture this week for posts on these topics.
- Monday: Happy Martin Luther King Jr. Day!
- Tuesday: Retraction Watch round-up
- Wednesday: Business compliance priorities for cryptocurrency
- Thursday: USDA enforcement priorities
- Friday: Compliance in series four of Black Mirror
Don’t miss it!
Check out last week’s posts on Compliance Culture, in case you missed or want to revisit them.
- Monday: The moral hazard of “future-proofing” your business
- Tuesday: Fraud in sports: Doping scandals
- Wednesday: Regulatory and compliance omissions in the Volkswagen emissions scandal
- Thursday: Round-up on FDA compliance
- Friday: Selected TED/TEDx talks on integrity
Many thanks for reading!
Integrity as both a personal and an organizational value is one of the central and recurring themes of this blog. Promoting and supporting integrity in individuals as well as in the groups in which they live and work is essential to encouraging cultures of compliance and ethical decision-making. Indeed, the foundation of the moral conduct people wish to see in each other and in their institutions in order to enhance the stature of truth and honesty in today’s complicated, interconnected world starts with placing personal emphasis on integrity and character ethic. With a strong and well-articulated individual commitment to moral engagement, people can purposefully contribute to the integrity of the communities in which they live, the groups in which they gather, and the organizations in which they work.
- Aligning integrity with identity (Lester Tanaka) – Commitment to any character ethic value must be authentic. A person cannot decide to have integrity without actually embracing the honesty, judgment, fairness, transparency, and credibility that goes along with possessing this trait. Claiming to have it, without actually genuinely imbedding it, goes against the grain of the entire concept of integrity itself. Therefore individuals must, as Lester Tanaka suggests, make concrete and meaningful for themselves the interrelationship between the mental and the moral. A person’s identity should be aligned with and connected to the value of integrity and their intention to live with it. Therefore, all the other traits for which an individual has an affinity should be consistent with the goal of integrity. Self-examination and self-reflection will be both necessary to identify these corresponding characteristics as well as important for thoughtful and organic personal integrity.
- Integrity as a currency for leadership (Barth Nnaji) – Integrity is also a core value for leadership. When faced with opposition or adversity, challenge or doubt, ethical leaders can always rely upon their integrity to represent themselves as credible, rise above the fray, and maintain a firm grip on ethical standards for decision-making and conduct. One of the differences between a manager and an ethical leader is, in fact, this commitment to their sense of integrity and the feeling of a strong responsibility to resist negative temptation or becoming overwhelmed by the magnitude of their tasks. True leaders stick to their own values and indeed promote their own integrity as the “currency” needed to get things done in collaboration with other people and organizations. Leaders who consider their reputations as one of their main assets would seek to protect the way they are seen by others by staying true to the expectations for their credibility and reliability. This way, people who lead with integrity become people with whom others wish to be associated, compared, and involved.
- Building integrity – keeping promises (Erick Rainey) – Establishing integrity does not have to be an academic or theoretical challenge with abstract and lofty metrics by which its success is measured. Having integrity is as simple as keeping promises. Walking the walk, taking responsibility, and following through are simple but incredibly impactful actions which, when repeated, establish a pattern of integrity and worthiness of trust and reliance. This goes for individuals as well as for organizations. Delivering on commitments or being honest and transparent about it when it’s not possible to do so puts the value of integrity into powerful action.
- Integrity and authenticity don’t make you trustworthy (Struan Robertson) – As noted in this earlier post, expectations for and ideas about trust, honesty, and the truth are all being transformed by today’s digital society. Shifting moral evaluations and perceptions of what is or is not true too often promote a convincing and compelling brand of dishonesty over difficult or complicated truth. In this environment there are many complex factors against true credibility and integrity. Simply appearing to be “good” or wanting to identify others as “evil” is not sufficient. Being relied upon is also not the same as being trusted or trustworthy. As discussed above, commitment to integrity has to be both authentic and practical. An individual and all the individuals which make up organizations have to have an organic, real commitment to integrity in order to truly act with it, rather than to just pretend or attempt at it.
- Integrity and the Life of the Planet (Zale Zeviar) – Apart from the integrity of individuals in both private life and the work place, corporate integrity is so important in society’s attempts to solve huge challenges, such as making environmentally-friendly consumer choices. The transparency and openness that acting with integrity and moral certitude can bring is also applicable to business core values. Accountability for earth-friendly business practices and products is just one expression of corporate social responsibility that exhibits business integrity. Small changes by consumers can be enabled by community and business values which can help the whole system to aspire to a higher level of integrity. This “corporate consciousness” is an active expression of integrity that spreads, aligning all the players in the chain universally around integrity as the common theme.
As shown above, defining integrity as a core value in all areas of life – self-identification, leadership, relationships with others, community engagement, social responsibility – is a powerful, purpose-driven approach. A commitment to recognizing integrity as a virtue and using a strong internal sense of its importance for one’s personal moral code enables individuals to be credible and responsible and to model these values to each other. With time, institutions and organizations will reflect the integrity promoted by the individuals within them, elevating the ethical register of society.
This is the fourth in a series of seven posts about regulatory compliance priorities and enforcement trends. The first post was about the Commodity Futures Trading Commission (CFTC). The second post was about the Federal Trade Commission (FTC). Last week’s post was about the Securities & Exchange Commission (SEC). Today’s post will be about the Food & Drug Administration (FDA). Next week, on Thursday January 18, the post will be about the U.S. Department of Agriculture (USDA). On Thursday January 25, the post will be about the Environmental Protection Agency (EPA). Finally, on Thursday February 1, the post will be about the Federal Communications Commission (FCC).
The Food & Drug Administration (FDA) is the US regulator charged with supervising and enforcing federal laws concerning food, tobacco, dietary supplements, medications and medical treatments and devices, cosmetics, and animal and veterinary products, among other related products and devices related to public health and food safety concerns. The FDA was created in 1938 by the Federal Food, Drug and Cosmetic Act, which gave the FDA oversight on food, drugs, and cosmetics and now constitutes of the major bodies of federal securities law it is responsible for enforcing. Other significant statutes within the purview of the FDA – either wholly or partially, in collaboration with other federal supervisory and regulatory entities – include the Public Health Service Act (from 1944, concerning the prevention of foreign communicable diseases within the US) and the Controlled Substances Act (from 1971, creating federal US drug policy).
The food, medical, and veterinary products that fall under the regulatory purview of the FDA represent a significant proportion of the consumer goods imported into, purchased within and used in the United States, meaning that the FDA has broad reach into people’s everyday lives and therefore wide oversight duties to ensure adequate protections. Food, drugs, cosmetics, and vitamin supplements are the largest categories of consumer products regulated by the FDA. The FDA’s regulatory powers are broad in scope, including a huge array of business practices, from development, testing, and manufacturing to advertising, labeling, marketing, sales, and supply chain safety. Enforcement of standards, oversight and monitoring of practices, approval of products, and handling of violations gives the FDA a heavy footprint in its covered industries.
- Homeopathic drugs: The mandate of the FDA to regulate a variety of medicines and related treatments extends to addressing homeopathic drugs. These products are widely available to consumers but previously have been lightly regulated. Given burgeoning consumer protection concerns due to public harm from products that do not have any value as medical treatment and can in fact injure people or make them sick, the FDA is planning to take a more active role in the homeopathic drugs market. Since the 1980s, the FDA has had a policy of not using the full weight of its enforcement authority with homeopathic drugs because their impacts were thought to be so minor that they could not be dangerous. However, as more people have started using these homeopathic remedies, the risks and need for protection, especially for infants, children, and elderly people, have grown. Last year children were sickened and even died from using homeopathic teething remedies sold at CVS due to poisoning from belladonna, which the medicines contained in dangerous proportions. Testing, approval, oversight practices, or some combination of the above are apparently necessary for ensuring that these products do not hurt people, contain the ingredients they are supposed to in the amounts they should, and can provide medical benefit to support the health-related claims made by the manufacturers to consumers: FDA to target ‘potentially harmful, unproven’ homeopathic drugs under new proposal
- Cryotherapy: On a similar note, cryotherapy – immersion in a chamber cooled to as low as -132 degrees Celsius to treat inflammation and all kinds of other ailments and discomforts – has been spreading in popularity and caught the attention of the FDA. Cryotherapy is often billed as a kind of spa treatment and has won the endorsement of athletes and celebrities for its health benefits. However, the FDA has reacted skeptically to these claims, especially as people have been injured by unprofessional service providers or attempts to administer cryotherapy “treatments” to themselves. If people continue to view cryotherapy and other popular science type activities and procedures as giving them some medical or curative benefit, which seems likely, then the need for the FDA to intervene by setting standards and providing oversight will grow alongside the popularity: The spread of cryotherapy
- Opioid epidemic: The FDA is well-positioned to contribute to efforts in containing the public health emergency of opioid drug abuse. The FDA is responsible for overseeing both the number of prescriptions issued and the introduction of drugs to curb and treat addiction. Overhaul of the system in which opioids are prescribed, and the rationale behind the length of prescriptions, is in the reform jurisdiction of the FDA. This system would likely be funded by the pharmaceutical companies that make opioids, similar to what is already done to pay for other similar programs covered by the FDA’s enforcement authority. Prescription intervention as well as the expedition of new versions of drugs to treat addiction will be priorities of the FDA on its upcoming regulatory agenda: FDA plans to curb prescriptions to fight opioid epidemic
- Gene therapy: Apart from approval of drugs, the FDA is also tasked with approving medical treatments. Gene therapy has been a hot topic in bioethics for years, with questions about the use of stem or other cells from humans having dogged the technology’s development for years, but having promising treatments for genetic diseases now finally in its pipeline. The FDA recently approved the first genetic therapy for an inherited disease, a rare form of childhood blindness. The price of the approved treatment is currently astronomical, at almost $1 million, but the hope is that the FDA approval will open the door for further development that could lead to lower prices and improved benefits over a lifetime. FDA openness and speed in considering and approving these technologies will certainly have an encouraging impact on the innovation within the field and the introduction of further treatments using gene therapy and improving upon knowledge and practices around it: FDA approves first gene therapy for an inherited disease
- Food safety and recalls: Finally, the FDA’s food safety and recall programs may be an active area for reform and extended consumer protections going forward. The FDA’s broad authority for food safety inspections has been critiqued in the past for culminating in uneven enforcement efforts. Most recently, the Office of the Inspector General at the Department of Health and Human Services and the Government Accountability Office have both exposed shortcomings in the FDA’s enforcement of food safety policies. Inspections, follow-up on food safety violations, and supervision of and collaboration with state-level regulatory personnel have all been found lacking: Watchdog audits fire warning shots at the FDA’s food safety program
Addressing these deficiencies in the oversight process, and following with substantive improvement in the food recall process, has major implications for consumer safety. The recall process in particular is crucial for ensuring that any gaps from the production and distribution processes oversight that are not filled, are caught before contaminated and dangerous food and supplements are sold to consumers. However, audits have found that the recall process is not up to muster, indicating that they take way too long to kick off and that the FDA does not do enough to compel companies to cooperate with their warning letters and issue recalls: The FDA Is Still Scary Slow at Food Recalls
Be sure to check back next week for a round-up on USDA regulatory compliance.
The Volkswagen emissions scandal, also known as “Emissionsgate,” kicked off in 2015 when the US Environmental Protection Agency (EPA) notified the carmaker that it was in violation of the Clean Air Act. With the altered engine emissions controls, the programming misrepresented nitrogen dioxide output so that it appeared to meet US market standards. In reality, however, the real performance of the vehicles on the road without the altered programming for the testing environment resulted in output that exceeded the regulatory limit by up to 40 times. For a basic overview of the Volkswagen emissions scandal as it unfolded since 2015, check out this primer from the BBC: Volkswagen: The scandal explained.
The altered emissions results were ultimately exposed due to re-testing. The International Council on Clean Transportation accumulated research from a variety of sources which upon study showed additional emissions in road tests from those recorded in the regulatory testing environment. Once these non-conforming results were provided to the California Air Resources Board in 2014, they were ultimately escalated to the EPA, resulting in the investigation and enforcement action which led to the Clean Air Act notice of violation. The investigation conducted by the EPA demonstrated that from 2008 to 2015, Volkswagen had intentionally modified many diesel engines in its vehicles to fraudulently “pass” regulatory testing.
In the aftermath of the EPA notice, Volkswagen was subjected to investigations in various countries. The fix for the emissions issues to bring them into true compliance with the regulatory standard may cost the company as much as $15 billion or more, with fines so far in the US alone of almost $3 billion and several executives facing personal criminal charges for their role in the fraud.
One of the striking aspects of this particular corporate scandal is that as the corporate misconduct was exposed, it showed that Volkswagen took advantage of the regulatory testing by exploiting design and engineering knowledge in making engine construction choices expressly in order to deceive it. In many cases of consumer safety or standard violation recalls, the manufacturer merely fails to make required changes or delays doing so, resulting in unsafe conditions or violation of regulatory and legal requirements. Similarly, defeat devices which “trick” regulatory testing systems (actually codes programmed into the vehicles’ computerized control panels) are nothing new in the automotive industry, as explained in this Ars Technica piece.
In the Volkswagen’s case, however, as explained in this Investor’s Business Daily article, the carmaker made redesign choices to its emissions system that were not practical for business purposes but directly enabled the testing manipulation. Then, when faced with a need to demonstrate compliance in order to access the market, instead of altering planned performance or gas economy standards, the company opted to game the system with installing defeat devices on the very system it installed knowing it would need to be defeated and would enable doing so.
So why would a company make all of these conscious choices to dupe the system and spend money on deceptive systems instead of making the same amount of effort to establish real compliance and avoid the dishonesty? At its root is most commonly what was referred to in lawsuits against Volkswagen by several states as a business culture of “corporate arrogance.” As this NPR article explains in a nutshell, Volskwagen thought it could get away with the fraud because others in the industry did it too and because it was Volkswagen. The company rigged its vehicles after going to great lengths to determine that it was definitely illegal to do so, against clear legal advice and in light of full knowledge of the consequences, and in a culture of non-compliance which rewarded cheating and did not take responsibility or model appropriate conduct.
Nowhere is this values deficiency in the Volkswagen corporate culture more evident than in the reaction by the CEO, Matthias Mueller, to the public outcry in response to the fraud. This interview with NPR shows how problematic the tone and conduct at the top was in the public handling of the scandal. Rather than modelling accountability and transparency, Mueller instead insisted that there were no ethical issues at Volkswagen and that rather the emissions fraud was due to a technical problem in the company’s interpretation of US law. Mueller repeatedly asserted that the company did not lie or deceive but instead misunderstood US legal requirements, a disingenuous and unconvincing defense for a major global corporation which must contend with a complicated fabric of regulatory and legal frameworks all over the world to meet its duties in doing business.
The gap created by this purported legal misinterpretation could and should have been filled by a values-based approach, where taking corporate social responsibility for environmental impact and making business decisions based upon best collective outcome rather than ease and expediency, with some enablement of future cheating as a side benefit. Demonstrating integrity is not as simple as apologizing once you get caught, and portraying violations as mistakes is not an example of ethical leadership or sustainable business values.
For more on EPA compliance, check back on Thursday, January 25, for a round-up on current rule-making and enforcement trends at the agency.
This is the fifth and final post in a series of five posts on the topic of fraud in sports. The first post, from December 5, was about cheating in marathons and how incidences of it are exposed, investigated, and disclosed to the public. The second post, on December 12, was about fraud and falsification among thru-hikers within the long-distance hiking community. The third post, from December 19, was about fraud in sports from gambling and betting. Last week’s post focused on fraud in sports via game/match fixing. Today’s post will be about major doping scandals in different sports and will discuss the ways some very high-profile athletes cheated by doping, how their uses of performance enhancing drugs were supported or not identified by various institutions, and how individuals impacted for various reasons by doping have dealt with this in the aftermath.
Doping has been a controversial topic in the sports world for decades, as scandals over the use of performance-enhancing substances in various athletic programs have recurred unrelentingly. Revelations of doping by athletes, both on their own and as part of national athletic programs that have sponsored and aided them in taking drugs to artificially aid their performance, have been in the news constantly. Heroes from sports have been knocked off their public pedestals as the truth of their cheating and drug use has been revealed. Olympians and world champions have lost their medals and records, while state athletic systems have put the chances of future athletes, now innocent of any wrongdoing, of competing on the world state at risk because of prior systematic unethical decision-making. Athletes who competed “clean” have been robbed of their moments of glory and missed out on professional opportunities they would have had, if they had not been bested by other athletes competing unfairly while taking performance-enhancing drugs. Sponsors have invested in athletes based upon unreliable, misrepresented statistics. Above all, the integrity of the game for other participants as well as spectators has been impaired and thrown into great doubt and uncertainty.
The ways athletes dope are as varied as the sports and events in which the fraud takes place. The one reliable fact about the fraudulent use of performance-enhancing drugs in professional sports is that ongoing administrative efforts to test for it and oversee institutional protections against it are seriously lacking. Regulatory bodies, whether part of the athletic programs or connected to national programs or international organizations, are often inadequately supervised, incompetent for the task, or insufficiently resourced. Until major change takes place in the control frameworks and supervisory structures which exist to protect the integrity of sports from cheating and dishonesty, doping scandals will continue to undermine the credibility of athletic programs and events.
- The Russia doping scandal has been in the news unrelentingly for several years, stemming from accusations of state-sponsored doping during the 2014 Winter Olympics in Sochi, Russia. Claims of systematic doping in Russia, supported by the state system there which for decades has been well-known as one of the most intense and involved national programs in the world, have dogged the state officials, the athletes both from past delegations and with future ambitions of competing, and the International Olympic Committee (IOC). After investigations which have been dogged every step of the way with unreliable information from state-sponsored anti-doping testing centers and repeated discrediting of various athletes from past Olympics, the IOC decided to ban Russia from sending an official delegation to the 2018 Winter Olympics in Pyeongchang, South Korea. Russian athletes will still be eligible to attend as neutral delegates, but pride of representing their country or the opportunity to stand on a medal podium for it will not be possible. This story will continue to unfold and promises to hold only further dishonor and disappointment on many sides: Russia doping scandal
- For sure the continuing drama with Russia’s state sport system will go on right away, as Russia is hosting the 2018 World Cup. This creates an uncomfortable situation for FIFA. In the aftermath of the IOC banning Russia from the 2018 Winter Olympics under the cloud of doping suspicions, public outcry has grown for FIFA to consider banning or punishing Russia in the 2018 World Cup as well. This is a considerably more awkward proposition, as Russia is the host of the upcoming 2018 World Cup, and FIFA is no stranger to its own controversies from legal accusations of corruption and bribery by its officials in various countries. It is difficult for FIFA to ignore that the current controversy around Russia stems from when Russia hosted the Olympics in 2014. Russia hosting the World Cup in 2018, then, is fraught with concerns about integrity of game play if the host country fields a team. Barring the Russian delegation from competing in an event their country is hosting is hard to imagine, but may be just the sort of consequence that could make necessary change begin to take root: After IOC Bans Russia From Winter Olympics, FIFA Has To Decide About World Cup
- Despite his once-storied history as a cyclist, cancer survivor, and inspiring public figure, Lance Armstrong is best-known now for something much less honorable. His enduring legacy as of now is of having doped for years, evaded being caught by any testing efforts, denied it constantly and extremely publicly, and then faded from the public eye upon convincingly being exposed as a cheater and a liar. While much has been written about the puzzling and complex psychology of someone who would pull off such a brazen and persistent fraud while holding himself out as the paragon of honesty and motivation for achievement, one of the more interesting questions has always been how he got away with it for so long. It was definitely a team effort, and subsequent reports have shown that indeed Armstrong and those who supported him and benefited from his ongoing performance created a wide-spread doping program in which they studied and exploited weaknesses in the anti-doping system and brazenly avoided detection and testers: Report Describes How Armstrong and His Team Eluded Doping Tests
Years after his precipitous fall from grace, Armstrong is seeking to rehabilitate himself in the public eye by doing a podcast and seeking a return to his position as the foremost expert in Tour de France inside knowingly and cycling expertise. With his race victories erased by the disclosure of his doping that got him to them, Armstrong is seeking both a platform and an identity, and wants to connect both to the sport in which he was once an idol. However, the dishonesty of his eminence in the Tour de France while he was cheating to sustain his achievements make it difficult to imagine redemption or even revisionist acceptance of his actions to bring visibility to the sport of cycling: Lance Armstrong: ‘A man with no platform is a lost man’
- Chris Fromme is a successor to Lance Armstrong in the world of professional cycling. For years, cycling has been tormented by disclosures of doping and the impact of drug abuse on the sport. Athletes have been discredited and records vacated seemingly without end. Fromme is one of the stars of a cycling squad, Team Sky, which is very vocal about their zero-tolerance policy for doping and their commitment to clean racing. So, if his drug test results that indicate he’s doped are upheld, he could be subject to a yearlong ban and major reputational risk for both himself and his team. Fromme is arguably the biggest superstar in cycling since Armstrong, so if he ends up discredited too, then professional cycling will have a major existential crisis on its hands. An overhaul of cycling’s doping rules and enforcement practices to improve and simplify doping regulations could both improve credibility and ensure more transparency and clarity in the system in the future: The Only Solution To The Chris Froome Problem Is The One Cycling Will Never Accept
- Like cycling, track and field is another sport which has been oppressively troubled by allegations of doping and dishonesty. Athletes in track and field were disproportionately impacted by the Russian doping scandal as it unfolded during the 2016 Summer Olympics in Rio, Brazil and showed that the world records, qualification times, and even prior medal-winning races lacked integrity due to the participation of athletes who were on drugs. Many track and field stars, including some whose own careers had been negatively impacted by dopers who won medals and impacted sponsorship and professional chances they should have had, thought this was the moment for reform in anti-doping supervision and regulation. However, this change has not come, and the opinion of athletes in the sport is unanimously that current drug testing schemes and rules are inconsistent and insufficient, do not work or represent the interests of athletes, and are therefore not fair to anyone: We Asked Veteran Track & Field Athletes How To Possibly Fix The Doping Problem
One possible solution which has been bandied about is a reset of the annual records in track and field events to reflect only those from after 2005, which is when new anti-doping standards in track and field were implemented. This may be an attempt at radical fairness, but it may be too much about optics and not enough about substance, and therefore not the right move to truly address and promote credibility in the sport: Track And Field May Scrap Its Records Because Of Doping Scandals. Is That A Good Idea? Newer testing technologies, re-testing of old results to catch and bring to justice prior cheaters, and cultural encouragement of whistleblowers could all be better to improve the odds of catching sports dopers or discouraging them from cheating at all: Sports Doping Cheats Fear Whistle-Blowers and Retests
If you enjoyed this series, look back to the ethical leadership in sports coaching series from last year. Check out the last post in that series, which includes links to all the previous in the set. In March, a new series on sports and ethics will begin, this time focused on integrity in game play and discussing topics such as the ethics of tanking, referee bias, penalty embellishment, and much more.
Corporate buzzwords are famously annoying. While they’re often intended to convey a positive or progressive intent, this business jargon can often becoming meaningless on its own, standing mostly for whatever management trend has caught senior leadership’s attention for that moment. “Outside the box”; “That’s in my wheelhouse”; “Have a dialog around”; “Agile”; “Lean and Mean”; “Operationalize”; “Gap analysis” – anyone who works in an office has heard and, probably eventually been aggravated by, these words and phrases.
From a compliance perspective, there is one corporate buzzword which is enjoying current prominence that is more harmful than others: “future-proof.” This term describes the aspiration of businesses to stay focused on improving today’s practices in order to be ready for tomorrow’s risks. It aspires toward a proactive, strategic model of compliance risk management. Thinking differently about compliance risks in trying to prevent or mitigate future problems instead of just responding to past ones is a more rigorous, assertive approach.
However, the concept of future-proofing is intrinsically flawed and worse yet, dangerous to rely upon. The idea that absolute certainty can be brought to compliance risk management is a moral hazard in the discipline. Responding to and anticipating risks can be dynamic and forward-looking. A crucial part of the practice of compliance is bridging the gap between what individuals and organizations must do or not do, and what they may, but claiming to predict future results sets an unrealistic business expectation. A robust compliance program is not an insurance policy, nor does a heightened awareness of compliance risk allow an organization to read the tea leaves and assure management and stakeholders that only calm seas lay ahead due to preparing a controls framework.
Rather than suggesting perfect immunity against changes in regulations and law and emerging risks, compliance officers should set realistic expectations with the businesses they serve. No one can tell the future, though of course for the right price any person will offer a guess. The allure of the unknown should not distract from concrete compliance demands.
The future will show what it holds in due time, and before that happens the best approach is to meet the current standards and exceed them in specific areas where the organization has shown vulnerability or seeks more risk and exposure. Complete compliance with current regulations and laws and a governance structure which supports and promotes all of an organization’s policies, procedures, and most importantly philosophies are non-negotiables. Companies cannot fail to get this part right before concerning themselves with what may be out of view over the horizon.
Let’s also not focus on the future at the expense of the past – real lessons should be learned from mistakes and experiences. Instead of just forgiving and forgetting, use what happened yesterday to derive a more informed assessment of the as-is situation and design a compliance program that capably responds to this instead of being overly formal and stale. Making a commitment to the practice of compliance as an ongoing function means that as the business evolves so does compliance, along with it instead of blindly ahead of it.
Certainty cannot be promised – indeed, this reality is one of the reasons why a responsive, strategic compliance advisory program is essential to any organization’s risk management efforts. Avoid making undeliverable assertions about future perfection and instead, focus on learning humbly from yesterday’s mistakes, out-performing the present’s expectations, and remaining open for the insights and challenges which are yet to come. Instead of future-proofing – focus on future-sustaining.