Corporate Compliance Cuts Raise Prospect of Looser Internal Oversight
26 May 2020

Corporate compliance departments are finding themselves in the crosshairs of corporate cost-cutters, raising concerns about the potential for mistakes or misbehavior to go undetected.

Layoffs and furloughs in compliance departments have arrived in sectors hardest hit by the coronavirus pandemic, according to consultants, researchers and compliance officers. Companies less affected by the downturn are trimming compliance-related expenses or making preparations for possible budget cuts. Some are choosing not to fill open positions or delaying planned investments in technology.

Compliance teams have largely been sheltered from major budget cuts in the past decade, according to Julie Myers Wood, chief executive of compliance and investigations firm Guidepost Solutions. “It’s unrealistic to think in a company that has mass layoffs across the board that compliance will be spared,” she said. “I think fewer people will be asked to do more.”

When employees take on additional work or face pressure to meet goals during financially difficult circumstances, the risk of misappropriated assets or fudged financials can increase. Anticorruption organizations have warned that the economic upheaval caused by the pandemic could create an environment that’s ripe for bribery.

“All of these factors are creating the perfect storm for fraud risk,” said Andi McNeal, director of research at the Association of Certified Fraud Examiners, a professional organization.

Demands on corporate compliance teams have grown along with increased regulatory enforcement over the past decade, requiring a balancing act to maintain effective controls.

Some compliance departments are dividing responsibilities to ensure that the most critical responsibilities, such as internal investigations, are covered, said Erica Salmon Byrne, executive vice president at Ethisphere, an ethics and compliance advisory firm.

Some companies that have made cuts say they’re managing to keep compliance procedures functioning properly.

Hilton Worldwide Holdings Inc. recently furloughed employees on its fraud and investigations team as part of broad cuts across the company. Hilton, like other companies in the hospitality sector, has struggled as a result of decreased travel due to the pandemic.

“We are confident that the monitoring, investigation and disclosure responsibilities are being appropriately managed by remaining team members,” Nigel Glennie, a Hilton spokesman, said in an email.

Other businesses may have a hard time handling the same workload with a smaller staff—especially as they shift priorities to accommodate smaller budgets and as some take on new compliance risks associated with remote work or new workplace protocols, compliance experts said.

By Kristin Broughton, The Wall Street Journal, 25 May 2020

Read more at The Wall Street Journal

Photo: Thomas Hawk [CC BY-NC 2.0] via Flickr

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