The LRN ethics and compliance risk management practices report

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DETAILED RESULTS In general, companies rate themselves as doing a moderately good job for the accuracy and timeliness of their risk management processes. The cumulative average for 2008 is 7.4 for both accuracy and timeliness, on a scale of 1-10 (with 10 being highest) This likely demonstrates the years of building up the knowledge and infrastructures needed to manage many risk areas, as well as conduct risk assessments, develop prevention programs, and investigate violations. Global companies are more confident about their headquarters than about their international regions. The most notable concerns are the confidence levels in global companies. Multinational companies consistently rated their accuracy and timeliness to address and mitigate ethics and compliance risks at a lower level for their international regions than at their headquarters. The gap in effectiveness for global companies demonstrates clearly that multinationals face greater challenges across distances due to the need to comply with more stringent or different regulations from country to country (such as European data privacy regulations) as well as with culturally diverse workforces that interpret ethics and compliance with varying rates of engagement. Some of the problems are associated with the logistics of doing business around the world, as multinational companies consistently indicate they have fewer prevention options and reporting channels in their regions than at headquarters. It is thus natural that their overall management capability for their international locations is lower due to the complexity of doing business globally. Mastering those challenges will be the work of the future for multinational companies, as they seek to define a unified ethical culture and comply with all applicable laws across their business units, regardless of location. Department budgets and program maturity have a significant impact on program performance. As might be expected, larger budgets and more program maturity yield greater results in the confidence levels of multinational companies, both at their headquarters and out in their regions. At headquarters, multinational companies with budgets over $500,000 rate themselves 8.0 on average for accuracy and 7.6 for timeliness versus 7.0 and 7.1 respectively for companies with budgets under $250,000. Similarly, at headquarters, ethics and compliance functions with more than 9 years experience rate themselves 8.2 for accuracy and 8.1 for timeliness vs. 6.7 on both factors for companies with under two years experience. In general, greater budgets and greater maturity lead to higher confidence for multinationals. The same confidence level spread occurs at their regional offices, where the larger budget companies average 7.1 for accuracy and 7.0 for timeliness versus 6.0 and 6.2 respectively for smaller budget firms. More mature companies average 7.4 for accuracy and 7.3 for timeliness versus 5.9 and 5.8 respectively for less mature companies. This suggests that companies are not yet fully assessing the size of the efforts to be done and accurately allocating the resources needed. A disconnect exists that affects most firms, even those that have larger budgets. However, it is encouraging to note that larger budgets do lead to greater confidence both at headquarters and at regional offices. LRN | 2008 Ethics and Compliance Risk Management Practices Report | 40
DETAILED RESULTS It’s also a positive statement that maturity gives confidence. With greater knowledge and familiarity with risk management and mitigation, companies can move forward building better prevention programs, managing investigations, evaluating and monitoring their successes and failures, and predicting future problems more accurately. Even when regulations change, or their companies move into new markets or create new products, a more mature department is likely to spot potential ethics and compliance risks earlier and work out solutions faster. In short, experience counts in this business. LRN | 2008 Ethics and Compliance Risk Management Practices Report | 41
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