BulletProofBlog the blog on crisis communications

Each week, Bulletproof Blog features exclusive interviews with thought leaders on issues of critical importance to companies and countries. This week, with the Foreign Corrupt Practices Act (FCPA) cases skyrocketing in the United States – and with anti-corruption regulatory enforcement being stepped up around the globe – we interview Laura Laybourn of PricewaterhouseCoopers' expanding Forensic Services practice where she focuses on Corporate Intelligence.

Ms. Laybourn has extensive experience in assessing and mitigating corruption risk in global business and investment operations for both private and public sector clients. In her capacity as a Director with PwC, she manages the Corporate Intelligence Group for PwC in the US.  Her role also includes oversight in the development of thought leadership and delivery of the firm's distinctive perspective in anti-corruption prevention, detection, controls, and risk mitigation through the PwC Anti-corruption Centre of Excellence. As a corporate risk specialist who has managed hundreds of international and domestic due diligence, investigations, and risk assessment engagements, she shared her insights with Bulletproof Blog™:

Tell us about PricewaterhouseCoopers’ Corporate Intelligence Group. Why was it formed? What does it do? Who is involved?

Laura Laybourn: PricewaterhouseCoopers has a long-standing practice of conducting forensic investigations and due diligence for clients in just about every industry sector. In fact, we have one of the largest forensic practices in the world. As a thought leader in anti-corruption, investigations, and due diligence procedures, PwC has established credibility with leading regulators in the U.S. and overseas. With dramatic increases in both regulation and regulatory activity taking place on a global scale, corporate leaders have an acute need for efficient mechanisms to gather facts and make decisions that reduce compliance and reputational risks in a number of areas.

International companies, for example, with a wide range of third-party relationships around the globe have a lot on the line to understand up front what risks are associated with forming and maintaining these relationships.  What are the business practices of the third-party? What is its reputational standing? Has the third-party been subject to regulatory actions? How will my company's reputation be affected by joining into the business relationship? Will my company be exposed to a regulatory violation attributable to the third-party's actions?  Basically, what am I inheriting in this third-party relationship?

These are just some of the questions that PwC’s Corporate Intelligence Group is designed to answer. We are distinctive in the marketplace – as we offer sound methodology for identifying risk, which in turn enables due diligence decisions to be much more defensible and reduces the need for our clients to continue to spend time and concern on what more needs to be done.  Rather than a templatized approach, our skilled staff makes continual judgments throughout the data collection process – and with subject matter specialist oversight, builds a report of meaningful analysis to isolate the potential risks that clients are most concerned about.

PwC has a global network of over 163,000 people in 151 countries. We also have Corporate Intelligence Centers of Excellence dispersed strategically in, for example, South and East Asia, Africa, and the UK.  PwC offers an industry leading capability and can provide analysis on timely and accurate information involving a wide range of corporate risks in virtually any area of the globe.

Why is it so important that companies conduct rigorous due diligence before any major transaction? What liabilities can arise if a company enters into deals without gathering as much intelligence as possible beforehand?

Laura Laybourn: In the most significant scenario, companies can be held criminally liable for the actions of their business partners. We’ve seen high profile cases brought against companies and individuals not because they were shown to have actual knowledge of a third-party’s malicious conduct, but because they failed to conduct the adequate due diligence that could have uncovered it. Companies are finding that they cannot avoid liability for third-party behavior by blinding themselves to the probable risks. The so called “Doctrine of Conscience Avoidance" makes a company liable by imputing knowledge of risks that would have been uncovered had the company conducted reasonable due diligence.

If problems do arise, being able to demonstrate that sound due diligence occurred before the deal can significantly decrease the penalties at play – both in the courtroom and the Court of Public Opinion. Due diligence is part of any sound compliance program, as noted  in U.S. sentencing guidelines and the many international anti-corruption standards promulgated around the globe including the World Economic Forum Partnering Against Corruption Initiative and Transparency International Business Principles--both of which PwC had involvement in formulating.

What’s next with regard to assessing market, territory, and third-party risk in business operations? Are there issues emerging on the horizon that risk managers need to be aware of?

Laura Laybourn: Standards to a large extent are being set within the industry and benchmarking is a particularly important exercise in order to keep one's practices in check.  While the bar for what is considered reasonable due diligence continues to rise, there are a number evolving risk-appropriate procedures that companies can be engaged in when vetting potential business partners.  PwC’s Corporate Intelligence Group is uniquely positioned to advise on customized and sound due diligence which appears to be and is achievable based on the challenges at hand, particularly for our clients managing a significant number of third-party relationships.

Additionally, we can help companies fold due diligence into an overall effective compliance program -- either from the ground up or strengthening components of one already in place.  Our professionals are engaged with standard-setting initiatives around the world. We know what’s changing on the regulatory landscape in real time and are positioned to help companies become more informed on the criminal, reputational, supply chain or brand liabilities involved with third-party strategies.

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Larry Smith is Senior Vice President of Levick Strategic Communications, the nation's top crisis communications firm, and a contributing author to Bulletproof Blog. Connect with Levick on Twitter: @Levick.