1 when the regulator comes knocking – 5 myths © copyright ellen bessner ellen bessner email:...
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WHEN THE REGULATOR COMES KNOCKING – 5 MYTHS
© Copyright Ellen Bessner
Ellen BessnerEmail: [email protected]: 647-725-2606
© Copyright Ellen Bessner
BOARD ASKS IN-HOUSE: WHAT TO DO?
INTRODUCTION: ARE YOU PREPARED?
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•Where is highest risk?
•Risk changing?•Compliance risk
plan?
Assess Risk/Heat Map
INTRODUCTION: ARE YOU PREPARED?
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• Reputational• Criminal• Civil • Regulatory• Internal
controls/governance
Potential Risks
INTRODUCTION: ARE YOU PREPARED?
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• Privacy• Employment• Client Issues• Regulatory Infractions• Corruption of Foreign
Public Officials
Potential Risks
MYTH #1 : EARLY IDENTIFICATION OF ISSUE? PRACTICE OSTRICH PHENOMENON
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Assess Seriousness of Risk
Know the RegulatorS
Build Team/Plan
Develop Protocols
BETTER OPTION: USE EARLY DETECTION
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Collection of Information
Develop Contingency Plans and Possible Responses
E & O; D & O Coverage[Understand Limits]
BETTER…USE EARLY DETECTION
MYTH #2: “WE CAN JUST FIX THE PROBLEM”
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BETTER THAN QUICK FIX…
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CONVINCE BOARD TO CONSIDER LONG TERM SOLUTION
Develop Plan for long term to be perceived as good corporate citizen
Short terms stock pain for ultimate stock gain (survival of the company)
Change problem into Opportunity (Maple Leaf Foods Michael McCain, won leadership/CEO prizes for his handling of Listeria
crisis)
BETTER THAN QUICK FIX…
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MAY NEED TO SPEND ON OUTSIDE EXPERTISE
Forensics or independent accountants review books and calculate damages
Lawyer to complement the internal knowledge and expertise
Who will liaise with regulators
Strategize with PR team
MYTH #3: FIND A TARGET TO BLAME
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BETTER…
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Conduct thorough investigation and become informed (ex. Lead paint in toys – know your suppliers; Tylenol drug tampering
causing death; what went wrong? Change packaging)
Don’t make sloppy mistakes (wrong scapegoat)
Can you enter into settlement with employee to go quietly and take blame with script?
Can company prove this was the cause?
MYTH #4: PREMATURE ADMISSIONS
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BETTER…
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BREATH AND SAY NOTHING
If surprised, keep them in meeting room until contact necessary counsel with specific industry experience
Check warrant and other documents
Do not be overly compliant- give them ONLY what they ask for (ensure legally entitled)
MYTH #5: DENY EVERYTHING!
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BETTER…
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DO NOT DENY OR ADMIT
Do not compromise company’s position- destroy documents (Conrad Black/Panasonic-Executive 1 Year in
Prison; Company $4.5M)
Keep copy of what is given and get receipt for originals
BETTER…
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DO NOT DENY OR ADMIT
Do not alert third parties who might also be investigated
Accompany investigator and take detailed notes
BETTER: HAVE DUCKS IN A ROW
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CONCLUSION Assess vulnerabilities – Risk Heat Map Be prepared with PLAN and TEAM Review/adjust plan and team Respond quickly Get ahead of the regulator (usually easy) Continue to review and update policies – top
down Goal: Mitigate risks, especially reputational
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MY PARTING NOTE: Terry Flynn professor of crisis management at McMaster
University:“… There are two courts that an organization operates within. One is the court of law and the other one is the court of public opinion and sometimes you might win it in the court of law but lose it in the court of public opinion and therefore, not have any customers at the end of the day to sell your products to.”
Ellen Bessner:“Wouldn’t you like to win in both – court of law and public opinion?”
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