Currently Latin America is experiencing several social movements with group demonstrations in Argentina, Brazil, Bolivia, Chile, Colombia, Mexico and Peru. Their demands go from respect for human rights, claiming protection for civil society, enforcement of the rule of law, health services coverage and, of course, support for the fight against corruption.
[fusion_button link=”https://magazine.ethisphere.com/wp-content/uploads/LatAmMagazine2020_EN.pdf” text_transform=”” title=”” target=”_self” link_attributes=”” alignment=”left” modal=”” hide_on_mobile=”small-visibility,medium-visibility,large-visibility” class=”” id=”” color=”default” button_gradient_top_color=”” button_gradient_bottom_color=”” button_gradient_top_color_hover=”” button_gradient_bottom_color_hover=”” accent_color=”” accent_hover_color=”” type=”” bevel_color=”” border_width=”” border_radius=”2″ border_color=”” border_hover_color=”” size=”” stretch=”default” icon=”” icon_position=”left” icon_divider=”no” animation_type=”” animation_direction=”left” animation_speed=”0.3″ animation_offset=””]Full Magazine in English[/fusion_button][fusion_button link=”https://magazine.ethisphere.com/wp-content/uploads/LatAmMagazine2020_ES.pdf” text_transform=”” title=”” target=”_self” link_attributes=”” alignment=”” modal=”” hide_on_mobile=”small-visibility,medium-visibility,large-visibility” class=”” id=”” color=”default” button_gradient_top_color=”” button_gradient_bottom_color=”” button_gradient_top_color_hover=”” button_gradient_bottom_color_hover=”” accent_color=”” accent_hover_color=”” type=”” bevel_color=”” border_width=”” border_radius=”” border_color=”” border_hover_color=”” size=”” stretch=”default” icon=”” icon_position=”left” icon_divider=”no” animation_type=”” animation_direction=”left” animation_speed=”0.3″ animation_offset=””]La revista completa en español[/fusion_button]
More and more frequently, newspaper headlines or social network trends mention the involvement of government officials of all levels in corruption cases, or illicit activities. Social networks have undeniable power to reveal such misdeeds and to bring light to cases such as the Panama Papers, Odebrecht, Pemex Gate, and many others.
On one hand, we can now see a negative “spread” by political actors throughout Latin America, who are seemingly in some kind of quest to see who will be involved in the biggest corruption scandal. Meanwhile, governments claim more transparency and zero tolerance, but are not able to implement systems that can really fight against it more effectively. On the other hand, there is a positive spreading by civil society looking for more transparency and accountability, and effectively combatting corruption. This is the environment which organizations have to navigate as part of a civil society searching for judicial, regulatory, and macroeconomic stability.
Below we will analyze some trends on the horizon for 2020 which are particularly relevant for those organizations that want to keep a world-class compliance program:
1. Uncertain climate that complicates analysis
Currently, organizations are operating in an uncertain climate without precedent, characterized by regulatory insecurity, geopolitical volatility, and macroeconomic uncertainty. All of them combined make it very difficult for ethics and compliance specialists to diagnose and handle an organizations’ risks even though quick, correct, proactive and effective answers are required by their clients.
More and more frequently, compliance specialists have to provide counsel in an uncertain regulatory field, at the expense of a “total compliance” culture. In other words, when faced with scenarios in which authorities issue either ambiguous regulations or, intentionally, they decide not to issue any kind of regulation, it is very tempting for organizations’ business areas—measured according to growth or profitability—to lean towards the “grey areas of law,” significantly increasing risk. Any opinion that sounds conservative or tending to minimize risk then seems to them inoperable or bureaucratic, taking the organization to a culture of “comply with the least inconvenient.”
Some recommendations to minimize the impact caused by uncertainty:
- Planning is essential when facing uncertainty. It is necessary for compliance officials to participate in any meetings where business plans are discussed, so they can better understand both the commercial challenges faced by the organization and its expansion plans. This way, they will be able to provide solutions that are not only theoretically viable. A good compliance specialist is looking for the way to offer “a how to make it possible solution” to his clients.
- Analyze diverse adverse scenarios in order to establish possible impacts on every essential area of the business, understanding that every commercial activity involves risk to a greater or lesser degree. The secret is to know how to balance the risk taken and the benefits that will be obtained when that risk is assumed.
- Constantly monitor regulatory changes that can affect operations and, if possible, participate with chambers and committees that help to educate legislators and regulatory authorities about the implementation of proposed measures.
- It is important to be agile but strict regarding the fact that decisions must always be taken with compliance in consideration.
2. New technologies can cause a clash between efficiency and ethics
Organizations that are looking to grow—in theory, all of them are—regularly develop new capacities, including employ “big data” or analytic tools that allow them to predict market dynamics. However, the development of these capacities does not always come with clear lines from a regulatory and ethics perspective, leaving organizations to decide between the value they can obtain exploiting those capacities, while trying to avoid crossing thin, undefined lines.
In Latin America, a stronger culture regarding private information access, handling, distribution, control, and even destruction of databases owned by organizations is necessary.
Therefore, recommendations include:
- Complying with regulations related to third parties’ personal information protection and handling. We should expect that users will demand increased protection, and it is important that organizations have the proper mechanisms.
- Compliance experts must get familiar with the use of new technologies in order to detect and mitigate associated risks in a proactive manner.
- Increase transparency around database and personal information use, because users expect that their information is being used only for purposes authorized by them.
- Create response mechanisms to address consumer questions/complaints about these technologies in an effective and quick manner.
- Implement controls related to data sharing.
3. Using Commercial Partners
Organizations are more frequently delegating to third parties some activities which will be carried out on its behalf, this implies a much more complex ecosystem. We have to consider that actions conducted by these third parties on behalf of the organization may bind it for legal purposes, creating joint liability.
Let’s now imagine that some of the common practices of these third parties are, for example, not complying with regulations about workers’ labor conditions, or employing minors, or offering gifts to government officials. Hence the importance of conducting the due diligence necessary to know the details of our partners, or those representing the organization. Relationships that deserve special attention include lobbyists, managers and consultants interacting with government officials, customs agents, subcontractors, law firms, charity organizations, and suppliers. recommendations include:
- Increase business partner monitoring to guarantee that they are complying with the standards of your organization.
- Provide tools so those third parties which do not have a compliance program can adopt one.
4. Investors/consumers are looking for Socially Responsible Companies
Due to what is occurring in Latin America, consumers and investors are increasingly looking for organizations who are good corporate citizens. Organizations that really want to demonstrate a real difference to investors and consumers must have a formalized social responsibility program.
The temptation to implement a “paper” corporate social responsibility program should be avoided at all costs, because adverse impacts could badly damage the organization, given that social networks can spread negative news quickly. Recommendations include:
- Implement a social responsibility program to differentiate your company from other competitors in the market.
- Implement a social responsibility program only if there is a commitment from different levels of the organization to keep this program “alive.”
- Provide an effective and timely answer to investors and consumers if there are any questions related to the program or its results, in order to decrease any negative impact.
In conclusion, challenges and opportunities faced by organizations in Latin America in 2020 require executives and compliance specialists to forget what they think they know, and to start to learn new ways to solve problems with a vision clearly focused on listening to what consumers and investors have to say, with ethics as their guide.
About the Author:
Carlos Garcia Jiménez has been Director of Ethics & Compliance for Latin America at UBER since April 2019. Carlos is responsible for promoting a culture of ethics and compliance based on values throughout the region, as well as a vision of compliance as a competitive advantage with the aim of promoting a culture of high integrity and provide practical guidance that allows sustained business growth. Prior to joining UBER, Carlos worked for TE Connectivity LTD as Compliance Counsel Americas from 2013 until March 2019; his previous experience was as Executive Director of Compliance & Ethics for the Intercon Region for Bristol Myers Squibb Co. Prior to BMS, Carlos worked more than 10 years in various legal and governmental positions in Mexico.