Best Practices In Ethics And Compliance: Lessons From Recent News Stories
In the rapidly evolving landscape of business ethics and compliance, recent news stories offer invaluable lessons that can help organizations mitigate risk and strengthen their internal controls. Here are just a few ethics and compliance cases that made headlines and provide succinct case studies for your team around risks to manage and best practices to put into action.
Intel’s Embezzlement Scheme:
Strengthening Third-Party Risk Management
A recent embezzlement scheme at Intel Israel, involving a third-party procurement intermediary, underscores the critical need for robust third-party risk management systems. The fraud, which resulted in the embezzlement of approximately $842,000, was facilitated through fake invoices classified as services to bypass stringent approvals. This incident highlights the importance of regularly reassessing spending limits, categorizing expenses accurately, and ensuring that third-party risk management controls are not bypassed by internal employees or external partners.
The positive market reaction to Intel’s handling of the situation, with its share price rising upon news of the resolution, suggests that effective internal controls and decisive actions can bolster stakeholder confidence. This case serves as a reminder for companies to rigorously vet third-party intermediaries and continuously monitor for patterns that may indicate fraudulent activity.
DOJ Whistleblower Program Update:
Promoting a Speak-Up Culture
The U.S. Department of Justice’s recent updates to its Whistleblower Pilot Program, which now prioritizes additional forms of misconduct (including procurement fraud and violations involving sanctions) emphasize the need for companies to foster a strong speak-up culture. By using the term speak-up instead of whistleblower, organizations can encourage employees to report misconduct without the negative connotations associated with tattling.
Companies must ensure their compliance efforts align with these changes by enhancing internal reporting mechanisms and collaborating across departments to address areas such as immigration compliance and tariff classifications. A proactive approach to promoting a speak-up culture can help organizations detect and address potential issues internally before they escalate to external reporting.
Kohl’s CEO Termination:
Swift Action Against Conflicts of Interest
Kohl’s recent termination of its CEO for directing business to his romantic partner showcases the effectiveness of a robust conflicts of interest policy. The swift detection and decisive action taken by Kohl’s Audit Committee, including an investigation by outside counsel, highlight the strength of the company’s internal controls and speak-up culture.
This case underscores the importance of having clear policies and procedures for identifying and addressing conflicts of interest at all levels of the organization. Companies should regularly train employees on these policies and encourage them to speak up if they observe any potential conflicts. By doing so, organizations can protect their integrity and maintain stakeholder trust.
AI and Third-Party Risks:
Navigating the New Frontier
The infiltration of companies by North Korean workers using AI to disguise their identities and secure remote-working positions presents a new frontier of third-party risks. This issue, which exposes organizations to trade sanctions violations and data security threats, highlights the need for a cross-functional approach to managing AI-related risks.
Ethics and compliance teams must collaborate with HR, information security, and other relevant departments to ensure that hiring processes are robust and capable of detecting fraudulent applications. Additionally, companies should implement monitoring systems to identify potential data breaches and ensure that their internal controls are equipped to handle evolving AI threats. By asking, ‘how could this happen here?’ organizations can proactively address potential vulnerabilities.
Elevating Ethics and Compliance:
Practical Lessons and Best Practices
The lessons drawn from these recent news stories demonstrate the critical role that ethics and compliance play in mitigating risks and strengthening internal controls. Stories such as these don’t just point out the price of ethics and compliance failures, but they also showcase the value that best practices build for organizations. By rigorously managing third-party relationships, promoting a speak-up culture, swiftly addressing conflicts of interest, and navigating new AI-related risks, organizations can enhance their overall integrity and resilience. These things are key ingredients for sustainable success.
For plenty of free resources on speak-up culture, investigations, conflicts of interest, AI governance, and more, please visit the Ethisphere Resource Center.
While you’re there, be sure to download our latest data insights report, Program Trends and Employee Perceptions.
