The year 2020 has been a year like no other. A year that was expected to be one of economic growth and prosperity suddenly and without warning came to a screeching halt due to a once-in-a-lifetime global pandemic. The economy shut down, people were laid-off or furloughed, and a once-promising business outlook turned grim and uncertain. Companies across all industries have endured the hardships of this new and unforeseen reality and are confronted with many new challenges. In particular, companies are struggling with how best to absorb declining revenues and lost business opportunities. For many, this means implementing cost-saving measures across the business. Deciding which budgets to cut and by how much is not an easy task. Companies have competing factions within their organization and each will advocate for an "anywhere but my department" approach to cost-cutting. To accommodate these varied interests, some companies will implement across-the-board budget cuts where each department will be asked to cut the same percentage from their respective budgets. In other instances, companies will target so-called cost centers (i.e. departments within a company that incur costs but do not directly generate revenue) for its cost-cutting measures. Under either approach, the Compliance Department is squarely in the crosshairs. Penny wise, Pound Foolish? Before a company implements budget cuts to its Compliance Department, it must consider the longer-term impacts of these short-term savings. Does a cost/benefit analysis support this reduction in resources and do current circumstances justify such a decision? To decide these critical questions a company should consider the following: Compliance Risk Profile While revenues may have declined and business opportunities lost, the health crisis has prompted no corresponding reduction to a company's compliance risk. In fact, a company's compliance risk has likely increased for two primary reasons. First, to meet the realities of the COVID-economy, many companies were forced to implement new and untested processes, override existing procedures, and invent creative solutions to meet unexpected challenges. These new ways of doing business come with new or changed compliance risks that are likely not contemplated or addressed by existing policies, procedures, and controls. Second, company employees like everyone else were blindsided by the pandemic and its related impact. In the blink of an eye, hours were reduced, sales goals became unrealistic, and performance bonuses became unattainable. As a consequence, employees face new personal and professional pressures to make up for these lost opportunities and improve their performance. These types of pressures create a business environment that is ripe for compliance-related misconduct. The above-described business realities will require more - and not less - compliance reviews, assessments, and monitoring. Existing Plans and Budgets A company's pre-cost cutting compliance budget, plan, and assessment could come back to haunt a company in the event of a compliance failure...
