This article first appeared in La Tercera on April 20, 2020.
For more than a month we have been living during a pandemic that has made us revisit our priorities and determine the next steps to take. Companies have had to evaluate how to continue to operate and survive one of the biggest economic and health crises in the world. And it is at this point that I would like to dwell since it is in major emergencies that we can lose control, give up the ground we have gained, and fall into unnecessary risks.
Crises generate an environment of uncertainty, the need to change plans and make decisions under pressure, creating an environment conducive to engaging in behaviors that lead to greater criminal risks such as bribery between private parties, bribery, unfair administration, among others. This is because organizations seek to reduce costs, dispense with workers -often a key component of internal control- and bypass processes to carry out operations that, although they may be legal, are not always internally approved. Thus, the emergency is often used as a justification for not complying with the controls imposed by the company.
So, while the world goes on and, even though some companies are “frozen”, the risks become more evident. For the same reason, compliance areas become essential, both to safeguard what has been done and to prevent possible crimes, especially of an economic nature, which in times of crisis are more frequent than we think due to the same relaxation of procedures and the rush to have solutions in the short term.
It should be noted that compliance ensures that companies act following the established rules and how they achieve their results, which in turn involves processes in charge of the different areas of the companies that must ensure compliance with their policies. The problem arises when in times of urgency a kind of self-justification is generated to skip these procedures that can be seen as bureaucracies but beware, they are not. What they are doing is protecting the company from committing crimes that can have not only reputational effects but also legal consequences for the board of directors and the company itself.
Therefore, companies must be open to relaxing processes in crises, but if they do so, they must be well documented and justified, because in the future, in the event of a possible irregularity, the excuse “we were in a pandemic” will be useless.
It should also be remembered that, for example, in the case of the crime of disloyal administration (when someone in charge of someone else’s assets commits an action or omission contrary to the interests of the owner for his benefit), the punitive responsibility also falls on those who were not directly involved, but who had the duty to know the facts and safeguard the assets. This may seem far away, but at this moment, business groups may be diverting funds from one company to another so that the weaker one does not go bankrupt. If both companies have the same owners, there is no problem, but if there are different minority shareholders, the crime of unfair administration could be configured. Therefore, if money is going to be lent between companies, it is essential that it is under the right conditions, and that this does not harm the “lender”.
In addition, in these times, certain strategic companies will need more interaction with public officials, so it is important to leave a record and ensure that no company funds go to other hands, no matter how desperate the company is to resume its functions or get a permit.
And so, we can find many examples of new risks in times of crisis.
Therefore, I invite you to consider the compliance area more than ever as a strategic partner within the company, which will accompany the business in the new decisions and guidelines, guiding compliance with the rules and implementing corporate policies previously designed. It is essential that companies ensure an adequate procedure, with the knowledge and approval of the board of directors, specifying the reason for the decisions taken, as well as whether they were taken with sufficient time to evaluate their pros and cons, and away from any kind of conflict of interest.
Let us remember that how the results are arrived at is as or more important than the result itself.
By Susana Sierra