Practical workshop: Risk assessments in competition compliance. Tuesday 20 March 2012

Transcription

1 Practical workshop: Risk assessments in competition compliance Tuesday 20 March 2012

2 Practical workshop: Risk assessments in competition compliance The Essential Elements of Corporate Compliance Tristan Grimmer Tuesday 20 March 2012

3 Essential Elements of Corporate Compliance Leadership Risk Assessment Standards and Controls Training and Communication Monitoring, Auditing and Response 3

4 Leadership 4

5 Leadership Compliance culture is the foundation of a successful programme Tone from the top at Board level Commitment to filter through all management levels Understand and leverage drivers for compliance Internal and external communication of commitment Board oversight Ethics or Audit Committee reporting to full Board? Compliance Director? Chief Compliance Officer? Role of GC? Interface between legal and compliance departments Avoid over-centralisation of compliance function 5

6 Risk Assessment 6

7 Risk assessment Understand the risk factors that your business faces: Sectoral risk: Past investigations? Industry-wide risks / practices Importance of intellectual property Use of distributors and agents Market characteristics: Market position of the company Level of fragmentation Nature of competition (price vs. product differentiation) Interaction with competitors: Trade associations JVs Hub and spoke Customer relationships 7

8 Risk assessment Methodology Risk assessment questionnaires Interviews Use of existing internal resources (e.g. internal audit reports) Review of existing systems and controls Responsibility for assessment External vs. internal Business, legal, compliance, internal audit, finance 8

9 Risk assessment - Output Consider carefully the addressees of full risk assessment Legal privilege / content Use of summary report for other stakeholders (e.g. Board, senior management) Outline methodology and limitations of assessment Use of risk matrices to grade risks into risk categories Areas of uncertainty or that require further assessment Timetable for updating risk assessment 9

10 Standards and Controls 10

11 Policies and procedures Public statement of competition law commitment Code of Conduct Substantive competition law compliance policies and procedures Other policies and procedures Policies must be clear, practical and accessible Certification by employees Ownership of policies at group, subsidiary and business unit level Local implementation 11

12 Training and Communication 12

13 Training and communication Identify training needs as part of risk assessment; prioritise higher risk personnel and business units Review merits of different forms of training, such as inperson, interactive or web-based delivery Support with appropriate testing of comprehension Consider who delivers training (e.g. external vs. internal, legal vs. business) Training should be business friendly and tailored to different audiences, e.g. sales / marketing personnel Maintenance of documentation / records (e.g. attendance, follow-up queries) 13

14 Monitoring, Auditing and Response 14

15 Monitoring, auditing and response Management information for Ethics or Audit Committee / Board Operation of policies and procedures Reported incidents Periodic review of risk assessment / policies and procedures Consider relevant input from internal audit Re-evaluation in response to internal or external developments Suspicion/events of wrongdoing Announcement of investigations affecting your industry / competitors Enforcement cases against other corporates Acquisition of business or entry into a new market Consider the benefits of external verification Incident reporting and handling (e.g. anonymous whistle-blowing hotline ) Use of compliance metrics to demonstrate that more than just a paper programme (e.g. number of employees trained, E-Learning scores of employees, frequency of tone from the top communications) 15

16 Practical workshop: Risk assessments in competition compliance Compliance Survey - Results Tuesday 20 March 2012

17 1. In how many countries does your company (entire group) provide products/services? 4% 8% % 17

18 2. How many employees does your group have? 28% 26% Under 10,000 Between 10,000 and 100,000 Over 100,000 46% 18

19 3. What is the annual turnover of your group? 7% 15% Less than 100 million Between 100 million and 1 billion Over 1 billion 78% 19

20 4. What is the estimated annual spend on competition compliance within your group? 30% Less than 100,000 47% Between 100,000 and 1 million Over 1 million Don't know/won't say 17% 6% 20

21 5. Does your company have a formal compliance policy/manual in place (as opposed to ad-hoc training and/or guidelines)? 30% Yes No 70% 21

22 6. When was your company s compliance programme last assessed? 7% 23% Within the last year Within the last 2-5 years More than 5 years ago 70% 22

23 7. How would you describe the Board s knowledge of competition law? 36% 31% Good. Adequate. Could be improved!. 33% 23

24 8. How would you assess the culture of compliance at Board level? 20% 44% Good. Adequate. Could be improved!. 36% 24

25 9. How would you describe knowledge of competition law among staff members? 23% Good. 52% Adequate. Could be improved!. 25% 25

26 10. Do you think that your staff regard competition law compliance as vital to the culture of the company? 21% 52% Yes No Don't know 27% 26

27 11. Has your company ever conducted a competition law risk assessment to identify high risk areas etc? 29% Yes No 71% 27

28 12. Does your company have an internal whistleblowing hotline for reporting compliance concerns? 12% Yes No 88% 28

29 13. Does your company have a Chief Compliance Officer, separate from the General Counsel? 49% 51% Yes No 29

30 14. How many times has your company been investigated for competition law violations? 41% 50% Never Once More than once 9% 30

31 15. When was the last time? 6% Not applicable 38% 56% Within the last 5 years More than 5 years ago 31

32 Practical workshop: Risk assessments in competition compliance Megalithic Inc: A Culture of Reliance Grant Murray Tuesday 20 March 2012

33 Background Megalithic Inc. is a multi-national company with its headquarters in Zurich. Manufactures and sells pharmaceutical products and medical devices worldwide. Main manufacturing facilities and R&D operations are in Europe and China. Meeting with CEO to discuss competition compliance. The story so far. 33

34 Doing business Distribution North America: direct sales to hospitals and healthcare professionals itself. Europe: network of distributors who "stick to their own turf" (in Malcolm's words). Asia: mix of distributors and non-exclusive agents, many of which have not signed a formal agreement. Joint ventures Europe: like its competitors, M has a R&D joint venture with a competitor looking into lightweight and mobile medical devices. Joint production company with a smallish competitor to grow M's low market share in scanners 34

35 Another BRIC in the wall Malcolm has approved large bonuses to General Managers in numerous BRIC divisions. New patent in China - meteoric rise in sales in China. Megalithic is now using just about every sales channel it can think of (dealers - some exclusive; some not; agents on commissions etc) to get its products to market. Major distributors in China and other Asian countries look to Megalithic for distribution advice on a daily basis. 35

36 Malcolm thinks that the permissive regulatory environment and collaborative approach in Asia/Lat Am seems to work better for business. Transfer of a number of high-performing sales managers to European units to see if they can shake things up. Transform national dealings in Asia into a single global supply contract. Malcolm was very satisfied to learn that only two other global medical device companies have been approached. CEO is regular speaker at industry conferences where he regularly comments on how the industry needs to modernise and respond to certain events. 36

37 The sceptred isle UK: land of opportunities - message from trade events and trade associations Pandora Ltd: a rocky start acquired (at a knock-down price Malcolm has always thought) one year ago. Government will be introducing an environmental levy on the raw materials used to manufacture Pandora's core products. Pandora's MD has it under control (lobbying/surcharges) Key account, Constricta, has been complaining and making threats about the low prices Constricta's competitors were charging for medical devices. Pandora sales team and some senior managers were quite shocked at the compliance training they were given 37

38 Compliance matters Informal atmosphere inspires employees to perform; people encouraged to talk to their supervisor/line manager about any commercial issue Systems in place: A centralised Legal Department in Switzerland that anyone in the group can contact. HR trains business divisions on compliance (some sort of record?). Long and detailed policy on competition law compliance on the company intranet site. Internal whistle-blowing hotline?. Active Health & Safety subcommittee which does induction training; each business unit has a H&S compliance 'champion'. But no 'Chief Compliance Officer' on Board 38

39 Ongoing investigation into bribery (intermediary at fault in "some far-flung jurisdiction") - publicity CEO loathe to spend significant amounts on specialist training for the company's several thousand employees spread across the world. Better to be reactive; can't stop a rogue after all Training makes people cautious anyway 39

40 Practical workshop: Risk assessments in competition compliance Tuesday 20 March 2012