A Closed-Loop Process for Compliance

on April 03, 2014

I recently had the pleasure of reading Tom Fox’s blog, “The Alchemist of Comedy and Utility Industry Compliance”. In addition to a nod to the late Harold Ramis and his contributions to comedy, I really enjoyed Tom’s replay of David Douglass’ (Kansas City Power & Light Company) presentation on the Compliance Maturity Model, which provides lessons that should apply to every business with a responsibility for serious compliance. Douglass cited the Federal Energy Regulatory Commission’s (FERC) Effective Compliance Program and its seven standards that focus on identifying violations, non-compliance, and poor performance along with the steps taken to correct problems, create incentives for effect performance, and screen out poor performers.

By focusing on detecting violations, understanding the causes of those violations, and determining what steps need to occur in order to prevent violations from recurring, FERC is describing a closed-loop process for compliance. The stakes are high in the utility and energy industries and so effective compliance is what ensures effective safety and security.

These same standards should be at the heart of every corporate compliance program. Whereas non-compliance for a large utility could result in large financial losses and even loss of lives, the financial stakes can be equally high for non-compliance with anti-bribery and corruption laws. Securities and Exchange Commission (SEC) and Department of Justice (DOJ) investigations can lead to legal and investigation fees in the tens, if not hundreds of millions of dollars. Global organizations operating in countries with high risk for potential corruption should take a cue from FERC when thinking about FCPA and other anti-bribery and corruption compliance. 

Oversight Insights On Demand™ is the platform through which companies can apply standards like those in FERC’s Effective Compliance Program to identify problems before they become multimillion-dollar problems.

T&E is a great place to begin implementing FERC-like standards to combat bribery and corruption. While T&E management solutions include policy controls along with all of the conveniences of entering and approving expenses, monitoring for potential bribery and corruption is something best accomplished by automated monitoring on a monthly basis (at least.) For less than the cost of a full time equivalent, companies can automatically analyze every expense transaction for indications of potential bribery and corruption risk. Solutions like Insights On Demand for T&E not only identify risky transactions, but help identify the entities involved in these risky transactions: the travelers, merchant category codes, and merchants. IOD helps identify the riskiest transaction and expense types by market and merchant category so these transactions can be scored with higher risks. This allows companies to monitor 100% of transactions while also understanding where the greatest risk exists, and allows companies to take the steps needed to address those vulnerabilities through training, changes in policy, or terminations of employees or contractual relationships.