Operational Risk Management professionals wonder about the “Tone at the Top” and decisions at the latest Board of Directors meetings to ignore or investigate a whistleblowers claims of ethics or governance violations in the workplace.
The financial services companies have for years been the target of scrutiny for claims of fraud, mistreatment of consumers and violations of several U.S. federal regulations many under further examination by the SEC. As time goes on in the evolution of maleficence you will find examples of wrong doing in other private sector areas, such as the Defense Industrial Base (DIB), Retail and Information Technology (IT). Think about your own company and ask yourself how you treat and respond to the 800 number Ethics Line and those who staff the Internal Audit, Risk Management or Information Security departments. Are these enablers or impediments to your future success? Your answer may be a clue to the issue at hand.
The professionals in the Inspector Generals office, the Operational Risk Management department and the General Counsels office are also there for a good reason. Think about them as the last “Thin Blue Line” between your company becoming a success or falling into a cultural abyss that will plague the institution for decades. Steven Pearlstein explains from the Washington Post:
Steven Pearlstein: How could SAIC miss this? By Steven Pearlstein,
Last week in these pages, The Post ran a profile of John Jumper, the straight arrow former Air Force general who was brought in as chief executive of local contracting giant SAIC in the wake of an embarrassing overbilling scandal involving bribery, kickbacks, foreign shell corporations and a safe deposit box stuffed with $850,000 in cash.
A year ago company officials were publicly denying that there were any problems at all with its contract to build a new timecard system for New York City, which by then was so late and so over budget that “CityTime” had become a frequent target for the New York tabloids and political embarrassment for Mayor Michael Bloomberg.
It was just last June that SAIC executives and directors first informed shareholders that there might be a little $2.5 million overbilling problem with the contract and that federal prosecutors had brought criminal charges against six employees of an SAIC subcontractor. Shareholders had to read deep into Note 9 of that quarterly report to learn that there might be “a reasonable possibility of additional exposure to loss that is not currently estimable” that “could have a material adverse impact” on the company’s finances.
Published: April 21, 2012 MEXICO CITY —
In September 2005, a senior Wal-Mart lawyer received an alarming e-mail from a former executive at the company’s largest foreign subsidiary, Wal-Mart de Mexico. In the e-mail and follow-up conversations, the former executive described how Wal-Mart de Mexico had orchestrated a campaign of bribery to win market dominance. In its rush to build stores, he said, the company had paid bribes to obtain permits in virtually every corner of the country.
The former executive gave names, dates and bribe amounts. He knew so much, he explained, because for years he had been the lawyer in charge of obtaining construction permits for Wal-Mart de Mexico.
Wal-Mart dispatched investigators to Mexico City, and within days they unearthed evidence of widespread bribery. They found a paper trail of hundreds of suspect payments totaling more than $24 million. They also found documents showing that Wal-Mart de Mexico’s top executives not only knew about the payments, but had taken steps to conceal them from Wal-Mart’s headquarters in Bentonville, Ark. In a confidential report to his superiors, Wal-Mart’s lead investigator, a former F.B.I. special agent, summed up their initial findings this way: “There is reasonable suspicion to believe that Mexican and USA laws have been violated.”
1. If you think you have funded the risk management department in your enterprise adequately, you haven’t. Do not confuse your outside audit function with your internal risk management function.
2. If you don’t understand how your 800 number ethics line works and the outsourced organization that runs this, then you need to do so immediately.
3. If you have a favorite outside counsel to help you with investigations, it might be time for a check up. Even more importantly, it might be time to get your outside counsel firms and your outside audit firms invited to a meeting of the minds on corporate integrity.
4. If you find any indications that 1 through 3 have been ignored, pushed aside or been giving you a false sense of security, then you might consider making a career change.