On 14 April 2020, the Wall Street Journal revealed another challenge facing the compliance industry during this time of social distancing – suspension of onsite visits for corporate compliance monitors. Corporate monitors are independent compliance experts appointed by regulators, usually as part of a settlement. Monitorships vary in scope and duration, and each requires a submission of work plans for regulator approval months ahead of time. The plans usually include site visits and reports based partly on direct observation of company culture.
As highlighted by the WSJ, mature monitorships may find this time welcome to catch up on report writing and the organization of observations and other next steps in the monitoring process. However, for newer monitorships, the limitation of the social interaction holds the potential to significantly stunt progress. New monitors will be forced to get to know a company and develop their supervisory plans digitally. This approach is likely to limit the effectiveness of their role as it relates to simply observing the day-to-day operations and interactions between employees and leadership of the company they are tasked to monitor.
Like all forms of human relationships – from professional to personal – one’s familiarity with another person stems from the initial meeting or first impression. Largely, the first impression is intangible. In this time of social distancing and digitalization, the intangibles of that first impression – or even day-to-day interaction among colleagues – may be lost over the web or simply changed by the circumstances of our isolation. Given these limitations, it may prove beneficial for compliance monitors to consider, in their evaluation, the impact the pandemic has on a company’s operations and culture. A corporate monitor may consider any or all of the following:
- How much of the business model was digital? What level of effort was needed to transition operations online?
- What parts of the business have been shut down or cut and why? What parts – if any – are thriving and why? These two areas may demonstrate successes and failures of the business model, any improprieties, and/or overall adaptiveness.
- How has communication and employee interaction changed (i.e. did it require a big or small change; has the transparency of the company enhanced, diminished, or remained the same?)
- What overall adjustments have been made to business operations – specifically, the compliance department (i.e. tuning monitoring systems to scan for pandemic-related fraud schemes; updated procedures to address clients that may be affected by unemployment, illness, and/or SBA paycheck protection program)?
Incorporating these answers, may provide color to certain observations and trends. It is possible in the course of digitalization, a company self-corrects exceptions in accordance with the terms of a regulatory settlement, thus minimizing the oversight need of a monitor. Conversely, a company can just as easily create more risk if appropriate due diligence wasn’t incorporated in the digitalization process, thus extending or transforming the monitor’s role and responsibilities.
Either way, the landscape of what was “standard” for corporate monitors and businesses will forever change. Fortunately, the evolution of this change and adaptation to a “new normal” will be endured by businesses and monitors together, which may yield a more cohesive, flexible, and efficient process than was ever seen before.
“I’ve had people sit in the room and they say all the right things,” she said, “and then you see them walk out of the room and you can see the interaction with the compliance people and you can tell they have absolutely no respect for them whatsoever, and everything they said was probably not exactly honest with respect to how they treat their compliance officers. “And you can’t do that remotely,” she added.