13 October, 2020 | (01 hr)
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The economic effects of COVID-19 are distinct from past financial crises. However, past financial events – like the 2008 financial crisis – can provide useful lessons on government enforcement. In this webcast, we discussed the enforcement trends and risks emerging from the COVID-19 pandemic and the likely areas of government focus. We will addressed lessons learned from past crises and how boards and management can plan and respond in the current environment. Som of the key insights include:
- Government agencies in the US and internationally are focusing on a few key areas, including (1) companies that are using the pandemic to mask accounting charges that should have been taken earlier (e.g., impairment charges); (2) misuse of material non-public information; (3) bribery, corruption, and fraud relating to government assistance and contracts, and improper use of such funds; (4) business continuity planning, particularly for regulated industries; and (5) the state of internal controls in place that take into account the remote working environment
- Enforcement risk is both broader and less predictable than in the past. Unlike the financial crisis of 2008, there are not “bad actors” on whom government agencies will focus. While firms that receive government funds or industries suffering acute downturns may be natural enforcement targets, all companies need to be alert – especially to scrutiny that might arise due to your business partners’ conduct.
- Looking ahead, especially if there is a change in Administration in Washington, D.C., expect more of a focus on negligence (not just fraud) as well as on complaints generated by whistleblowers.
- To prepare for the next wave of government enforcement efforts, (1) invest in compliance to make sure you have strong controls and processes in place and document your decision-making process in case you become subject to an investigation; (2) focus not just on tone at the top but also on tone at the middle, so that ethics and integrity are emphasized at every level of your organization; (3) watch out for red flags concerning business counterparties, as it may not be your biggest vendors who are your biggest risks; (4) take the extra time, required in a remote environment, to document all your decisions and certifications in preparing financial reports and have transparent discussions with your auditors; and (5) assess and test your systems for whistleblower reporting, investigate internal reports promptly, and implement any necessary remediation.
- Working remotely presents challenges and opportunities for compliance departments. Without the ability for hallway conversations and in-person meetings, be sure to increase the number of video meetings and training for employees. When conducting internal investigations, make sure that you spend enough time to build rapport with the interviewees and be sure you have effective controls over electronic documents. At the same time, compliance can help serve as the glue that holds a company together: this is an opportunity for your compliance department to help reinforce the company’s culture and give employees who are isolated situation a sense of belonging through ongoing communications.
- Governments are struggling to figure out how to conduct enforcement actions remotely -- you can respond creatively and to your client’s benefit. Due to a lack of clear policies and processes, government agencies are often approaching investigations in a fluid manner. Be sure you hire the right outside advisor who can help you think creatively, and tailor your response to the particular issues and personalities involved.
Who Should Watch: Current and prospective board members of public and private companies; CEOs, general counsel, and other C-suite executives; corporate secretaries; investors; attorneys; in-house counsel; and other corporate governance professionals.
John N. Pawloski
John N. Pawloski is the SVP, Global Chief Ethics and Compliance Officer for Assurant. In this role, John leads Assurant's Global Ethics and Compliance efforts, including the company's commitment to its Code of Ethics. As Global Chief Ethics and Compliance Officer, John is responsible for overseei...Full Bio
Matthew C. Solomon
Matthew Solomon joined the firm as a partner after serving for 15 years as a white-collar prosecutor and unit chief with the U.S. Department of Justice and as a senior enforcement official with the U.S. Securities and Exchange Commission—most recently as the SEC’s Chief Litigation Cou...Full Bio
Lisa Vicens’ practice focuses on a broad spectrum of securities enforcement, investigations and compliance, as well as securities litigation, with a concentration in complex, cross-border issues.
Lisa frequently works on matters in Latin America, particularly enforcement matters inv...Full Bio
Paul Washington is a recognized leader with a distinguished career in the ESG space. Before joining The Conference Board ESG Center, he served as Senior Vice President, Deputy General Counsel, and Corporate Secretary of Time Warner Inc. He also served as Chief of Staff for the company’...Full Bio