June 7, 2022
Disclosures: Going on the Offensive to Mitigate Risk
6 Min Read
In sports, sales, and business, you’ll often hear the adage, “The best defense is a good offence.” Although originally attributed to George Washington in 1899, the idea that you can best defend your turf by proactively eliminating a threat’s ability to inflict harm still resonates today. As ethics and compliance professionals, your job is to champion the culture, processes, and policies that prevent wrongdoing and harm from befalling your organization. Just as a pro chess player sees strategic moves before they happen, you can see patterns and threats before they occur.
Your Gifts, Travel, and Entertainment (GT&E) policies, paired with powerful GT&E technology, are some of the best tools for preempting unethical or illegal behavior. Don’t sit idle and allow your policies to stagnate on the shelf, going unread, unfollowed, or unenforced. Learn how to avoid the pitfalls of a manual GT&E policy and disclosure process by unpacking what happens when those policies go wrong, examine past examples of GT&E disasters, and see what happens to your compliance program when you team up with a fully-integrated platform.
Today, we’re looking at all things GT&E and disclosure management and how technology can help you maintain the upper hand.
When GT&E Goes Wrong
No matter your industry or location, GT&E policy infractions can result in major consequences. Business relationships, especially at the initial stages, often come with demonstrations of goodwill in the form of gifts, travel, or entertainment. While it can be permissible for employees to offer or accept these gestures of goodwill, companies need to ensure that these gestures don’t create conflicts of interest or the appearance of impropriety. When GT&E goes wrong, it can mean that GT&E policy training didn’t stick and the employee is unfamiliar with established disclosure management processes, or it can be because of intentional actions. Before we go into what GT&E looks like when it goes right, we must understand why and how it can go wrong.
The traditional passive GT&E process – using PDFs and manual disclosures – makes it nigh impossible to prevent conflicts of interest disasters like the ones below. The traditional GT&E process usually fails because of the following factors and shortcomings:
- Reliance on spreadsheets of variable quality
- Relatively manual processes
- Little or no manager/management follow-up
- Vertical authorization and no focus on lateral risks
- No real-time GT&E insights fueled by relevant data
- Inconsistent implementation and operation of both inbound (GT&E received) and outbound (GT&E given) processes
- No broader GT&E infrastructure to support valid GT&E, such as auctioning or donating gifts received for charitable purposes
Examples of GT&E Disasters
In 2012, the Securities and Exchange Commission (SEC) and the Criminal Division of the Department of Justice (DOJ) jointly published a resource guide, intended to provide information for businesses and individuals regarding the Foreign Corrupt Practices Act (FCPA). The guide outlines their anti-bribery and accounting provisions, their guiding principles of enforcement, and their penalties, sanctions, and remedies. If your organization wants to avoid reputational damage, investigational exposure, and the costly fines and remediation from the FCPA, take a look at how and why these two example cases failed to properly address and manage their GT&E disclosures.
Over the course of three years, Lucent spent more than $10 million on trips for hundreds of Chinese officials to “inspect” their American facilities. On the company dollar, officials visited locales like Hawaii, Las Vegas, the Grand Canyon, and Disney World, even though Lucent operated zero facilities in those locations. Once the company booked the related expenses as business trips, both the DOJ and SEC came knocking. They entered into a non-prosecution agreement with the DOJ and a cease-and-desist order with the SEC.
Over the course of four years, Diageo spent approximately $64,184 on pricey gifts for the South Korean military. The spirits brand incorrectly recorded the expenses and the SEC charged them with FCPA violations. To settle their FCPA charges, they were ordered to pay more than $16 million.
Gifts, Travel, and Entertainment Disclosures Done Right
Manual GT&E policies and disclosures are difficult to enforce and maintain, making isolated issues or failures impossible to track down. When done right, your GT&E disclosure management will drive compliance, transparency, and accountability. Move beyond siloed data based on “tick-the-box” disclosure requirements, avoiding process flaws and oversight, by making the case for GT&E technology with automated workflows and advanced analytics. Imagine how aggregated data, coming from disparate sources across your organization, could supercharge your risk visibility. An advanced GT&E platform facilitates data integration, resulting in a more proactive, transparent, and manageable program.
The Benefits of GT&E Technology
Not only will the right GT&E technology integrate with your policy and training platform, ensuring that your employees have the policy information they need at the right time, it can also help drill down to the root cause of underlying issues. Any experienced E&C professional knows how unusual it is to find an isolated GT&E issue, but without the assistance of advanced analytics, you’re better off searching for a literal needle in a haystack.
When leadership calls for GT&E reporting, the right GT&E technology can generate custom reports filtered by individual, team, function, country, and company. Beyond reporting to the board, the benefits of applying advanced analytics include:
- Observe problems and inconsistencies sooner and avoid surprises with at-a-glance analytics
- Leverage the wealth of data at your disposal to build predictive models, moving from a reactive strategy to a proactive one
- Enhance your reporting capabilities with richer and more structured data, collecting more insights over time
- Conserve the resources, energy, and time of your E&C department by implementing automations, including deadlines, exemptions, and follow-up notifications
- Request verifications and supporting documentation within a single platform
- Define routing rules, approval workflows, and escalation procedures, enabling fully-configured processes after an employee hits “submit”
Disclosure management doesn’t need to be an uphill battle. The status quo falls short, and a passive PDF on your website is no longer enough to prevent exposure to risk. Go on the offensive and mitigate risk with a fully integrated platform, empowering your E&C department to catch issues before they spiral out of control. OneTrust’s industry-leading Disclosures Manager streamlines the GT&E disclosure management process, reducing friction for administrators and employees alike.