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Data Can Unlock Ethics and Compliance Program Optimization

profile_pics_5One of the key insights from LRN’s 2019 Program Effectiveness Report is the need for organizations to operationalize their ethics and compliance programs by embedding them into everyday business activities, and not keep them as something people engage with once a quarter or once a year when it’s time to take the annual training.

One of the best ways to do that is to make optimum use of the organization’s data to better understand the level of employee engagement and trust; how, where and when concerns are being raised, and how quickly they are addressed; and to spotlight potential areas of risk, noncompliance and reputational compromise.

LRN’s Susan Divers, who helped to author the report, moderated a webcast last week with Joseph Suich, chief compliance officer and counsel at GE Power, and Collin Lowney, director of the audit services group at AECOM, to talk about ways to use data to drive ethics and compliance.

Data modeling is expected by regulatory agencies and is a must-have, said Suich. Beyond that, it can help improve return on the compliance investment by more quickly and efficiently identifying spreadsheet anomalies. These can be anything from unusual spending with a supplier, improper payments or just seeing that money is being wasted.

Data analytics can “show the value of the overall program, not just from a compliance standpoint as a champion of culture, but as a value-add,” said Suich.

One of the key metrics used by Suich at GE Power is open reporting, a comprehensive system to capture concerns from the hotline, human resources, compliance or via ombudspersons the company employs in the approximately 140 countries in which it operates.

“We all want issues raised, we all want people to raise issues, that's the kind of culture we want to drive,” said Suich, and these issues form the data that analytics analyzes to better focus the ethics and compliance program.

The rate at which people report their concerns--Suich says an average of 13 per 1,000 employees is a healthy number--shows how comfortable people are in coming forward and openly reporting issues, and also their level of trust with the organization. “It shows the power of analytics to take those programs and make them drive business priorities in the right way,” he said.

Analytics drives continuous monitoring

The LRN report found 47% of organizations who had what were ranked as high-impact ethics and compliance programs use data analytics to analyze patterns of misconduct, or to identify potential red flags, with another 15% planning to do so in the next year.

The use of analytics by all the programs included in the survey that formed the basis of the PEI report rose 30% from 2018 to 2019.

“Our research indicated that more programs, particularly those with high impact, use analytics to drive more effectiveness...and they do so in different ways,” said Divers. 

AECOM started its analytics program to improve audit quality of third-party partners and payments to them, said Lowney. The audit department collaborated with the legal and ethics and compliance teams to develop a tool that blends data, cleans data, and conducts analysis based on 14 risk-factor tests. These are used to risk-rank projects, project managers, business lines, vendors, countries.  

The continuous-monitoring system employs these tools to review financial and qualitative data that can help to identify risky transactions that could involve bribery, corruption or other internal-control deficiencies, said Lowney.

The system is user-friendly and doesn’t require business leaders to have programming skills, which Lowney said puts the analytics tools “in the hands of the people with the strongest business knowledge, not just coding knowledge,” making for readable and understandable dashboards.

“It allows us to do scoring of a quantifiable risk assessment on any area want to look at,” he said. “The flexibility of our dashboards allows us to look instantaneously. We can answer the who, where, when and how of every third-party payment.”

The tool also helps with unstructured data, as the team created a list of 75 Foreign Corrupt Practices Act-related keywords that AECOM’s global audit team global translated into four different languages. These include slang terms and euphemisms for bribery and other types of fraud.

Lowney said it’s been a successful means of flagging potential issues. “It’s more comprehensive for an auditor to read this through the dashboard than to read an excel spreadsheet and to try to piece this all together,” he said.

At GE Power, Suich meets with HR, IT and other departments every quarter, or whenever data shows a problem or potential lack of effective controls. Doing so allows for the proper subject-matter experts to be brought in to execute any additional controls and training that is needed.

“You really need to use this data. That’s where you see the business value...where you stop the bad problems from happening again,” said Suich. “That really is a value-add. 

“The biggest mistake is to have data like this and not use it.”

 

Ben DiPietro
@BenDiPietro1
ben.dipietro@lrn.com

 

 
MIND NUMBERS
 
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A survey by law firm Proskauer of more than 50 executives who are responsible for employment issues in their organization asked what types of reporting mechanisms are in place to allow employees to voice concerns: 98% said human resources, 91% said manager or supervisor, 81% said hotline, 36% said employee relations, 9% said ombudsman.

 

 
WHAT'S NEWS
 

Fresenius Medical Care, a German healthcare company, agreed to pay $231 million to the U.S. Justice Department to settle allegations the company paid bribes to win business in Saudi Arabia and Angola, Reuters reports. Dick Cassin in the FCPA Blog discusses the case.

Low-level employees at Deutsche Bank U.S. tried to tell supervisors about unusual activity that could be signs of money laundering in some $150 billion of transactions, their bosses told them to keep quiet and process the deals, Bloomberg reports. The bank now is embroiled in one of the largest-ever money-laundering scandals.

Pacific Gas & Electric named a new CEO and 10 new board members as it tries to emerge from bankruptcy, Associated Press reports. A federal judge ordered PG&E to stop paying dividends and use the money for fire prevention, United Press International reports. 

The Moscow Times looks at Russians' relationships with corruption.

KPMG's U.K. audit unit will undergo a comprehensive review of its controls, governance and culture by the U.K.'s Financial Reporting Council, the country's watchdog for audit and accounting firms, The Wall Street Journal reports.

A report from Arjuna Capital and Proxy Impact ranked 46 of the world's largest companies on gender pay equity, and gave half of them failing grades, New York Post reports.

The Los Angeles Times editorial board called on the University of Southern California to release the results of all its investigations into a series of scandals.

Hundreds of Google employees wrote a letter to the company asking that the head of the conservative Heritage Foundation be removed from his role as head of Google's ethics advisory board, Quartz reports.

Is the pressure for people to always be positive in their thinking turning happiness into a duty and a burden? Quartz talks to a Danish psychologist who thinks so.

 

 
FROM THE
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Launching this month, LRN’s new Principled podcast will bring together the collective wisdom on ethics, business and compliance, transformative stories of leadership and inspiring workplace culture. Listen in as we learn from E&C experts.

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