Companies that have invested in the right technology may have an advantage when it comes to investigating potential misconduct by employees while coronavirus-related travel restrictions remain in place, according to corporate compliance veteran Michael Ward.
Data analytics platforms, which place troves of information at the fingertips of in-house investigators, can minimize the need to dispatch lawyers to overseas offices to gather evidence, said Mr. Ward, who oversaw the development of such a tool while serving as the chief compliance officer of Juniper Networks Inc.
Mr. Ward, who joined the law firm Vinson & Elkins LLP as a partner this month, had been hired by Juniper in the midst of foreign bribery probes by the U.S. Justice Department and U.S. Securities and Exchange Commission. Before Juniper, which was later given credit for the steps it took to strengthen its compliance systems, Mr. Ward held in-house compliance positions at
Cisco Systems Inc.,
Mr. Ward recently discussed the risks posed to compliance by the pandemic and how companies are using technology and analytics to improve their programs. Edited excerpts follow.
WSJ: How is the coronavirus pandemic changing corporate compliance? Does it heighten any particular legal risks?
WARD: I don’t expect [employees] to misbehave just because of the crisis. Most remote working is not a reason for extra concern. In fact, most sales teams work remotely anyways. You don’t keep them in compliance by walking by their desk three times a day.
The bigger risk of the coronavirus crisis is the gatekeepers: compliance officers and senior leaders, who fall prey to the sense of a crisis and the need to cut corners or forego their usual compliance controls. Those actions will be judged in hindsight, and no one will care that there was a crisis when you decided to forgo your usual compliance controls.
WSJ: You were hired by Juniper in the midst of a bribery probe. Is there anything novel the company did in the course of its efforts to remediate and strengthen its compliance program?
WARD: The most important thing we did is that we implemented a program that responded to the weaknesses that were revealed in investigation.
That said, we did implement some new or evolutionary approaches. One of those in particular was a series of data analytics capabilities that allowed us to identify risk in travel and entertainment transactions or discount decisions at scale.
One of the big problems that we have had historically in compliance is that everything is very manual. The processes to identify risk through the classical “red flags” has not scaled very well for multinational companies with thousands of transactions across the globe.
Compliance programs are now bringing new skill sets onto their teams, which allow them to take a more data-driven approach to screening transactions and to identify truly anomalous transactions and give those greater scrutiny.
WSJ: One of the problems Juniper was trying to solve was gray market leakage. What is that and why was it an issue for Juniper?
WARD: The gray market is a big problem. Product leaks out of authorized distribution channels, and that erodes a company’s quality and distribution controls.
For Juniper and other companies, there is an element of economic arbitrage, where you can often buy a product cheaper in one region of the world and then sell it at higher prices in another region of the world.
We previously had troubleshot the gray market problem using instinct and anecdotal evidence. What we resolved to do is take a data-driven approach and study all of the transactions over a period of time to detect the flow of those products.
We took all of the addresses for the end users of the products that we were selling and we compared those with the addresses of all the products that we were servicing. We found which products were in the hands of end users who were different from whom we had sold to.
That revealed a lot as to which products were being leaked into the gray market, which distributors or resellers were most likely to engage in those resales, and even which end users were most likely to resell their products.
WSJ: Compliance analytics is a growing trend. What is the promise of analytics for compliance generally?
WARD: When you apply data analytics, you can look at 100% of the transactions. By looking at everything, you identify patterns, and you can disprove assumptions and anecdotes that you thought were true. And you can identify true anomalies, or patterns that you would have never imagined.
In the gray market example, when you’re deciding whether to approve an unusual discount request, you can have insights about the end user, the reseller and the product that can inform your decision in real time.
We’re not even talking about the compliance risks that you can more effectively manage. There’s pure business value in having that insight.
WSJ: Do these data analytics capabilities put Juniper at an advantage when it comes to conducting an investigation in the midst of the pandemic?
WARD: We typically think of data analytics tools as being detective and helping on the proactive side of compliance. It’s also an incredibly powerful tool for investigators responding to allegations or issues [after they occur].
Often the most time-consuming part of an investigation is the gathering and analyzing of evidence, particularly the transactional evidence. If you have a data analytics capability, you basically start on second base in that regard. You’ve already got all the data gathered, and you move straight to analyzing it and looking for patterns.
It saves an enormous amount of money—investigations are very expensive. When you have all these tools in house, you can conduct more investigations internally.
Write to Dylan Tokar at [email protected]
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