Hiperos Blog Anti bribery Compliance: The increasing cost of failure

These days I spend a lot of time engaging with industry analysts, experts and pundits, as well as with our customers, about all things anti-bribery/anti-corruption related, including the effects of an FCPA investigation on a company. So the recent announcement from a major beauty products brand that it may end up paying as much as $132 million to settle a U.S. bribery investigation got me thinking: when all is said and done, what is the total amount that this company will have spent to deal with allegations of bribery? I know that some of you were able to participate in the recent excellent webinar on "Compliance Leadership" with Tom Fox of TomFoxLaw and Jon Rydberg of Orchid Advisors. If you weren't able to attend and would like to listen to a replay: During the webinar, Tom highlighted that while global anti-corruption enforcement is on the uptick and the cost of US enforcement rose by 4x in 2013, a company needs to understand the total costs that can be incurred for an investigation: a company will typically spend 2x - 6x the cost of the final settlement or fine. Jon, who lived through an FCPA investigation as the company's Chief Compliance Officer, talked to how much internal resource an investigation consumes, in addition to costs associated with hiring outside counsel. Avon's investigation dates back to 2008; other companies, such as Pfizer, have had investigations that have lasted up to eight years. To give you some idea of scale and understanding that costs will not be the same throughout an investigation, in its Q3 2013 earnings call, Wal-Mart disclosed that it had $69 million in "FCPA and compliance related expenses" in the quarter - or approximately $1.06 million per working day. Per the company, the costs incurred were for the ongoing investigations and inquiries, as well as enhancements to the company's compliance program and organization. 2013 will be remembered for aggressive anti-corruption enforcement with growing numbers of individual prosecutions, record settlements, front page news stories, televised confessions, and more international cooperation among regulators than ever before. As a result, we are seeing a growing number of companies reviewing their anti-bribery/anti-corruption policies and procedures for third party management, and questioning whether they provide sufficient protection. At the same time, corporate legal and compliance executives still struggle to secure budget to implement a pro-active process to address what is increasingly understood to be a significant corporate risk.If you find yourself in this category, I encourage you to read - and have your board and executives read - Tom Fox and Jon Rydberg's new book: "Anti-Bribery Leadership" and consider what steps your company needs to take to "be compliant" versus have a compliance program.