Legal Risk: Tools for Trusted Governance...

One of the reasons that the United States has endured is because of transparency and the rule of law.  There are several key systems in place for corporations, organizations and governments to decide on the rules, publish them, enforce them and provide people with mechanisms for establishing trust in the system.  Operational Risk Management (ORM) as a discipline interfaces with many of them across the globe.

Policies that are not codified in laws are different across states and global jurisdictions.  The rules that people can rely on and have come to trust for hundreds of years, remain the foundation for our modern civil societies.  It is when the rules are ignored, under utilized or forgotten that disruption and chaos can erupt.

A key principle in modern democracies is that the rule of law is known. Statutes, regulations, court decisions, agency deliberations, and even the minutes of Federal Reserve meetings are published and made available. The operating premise is that, if the rules are accessible, civil order and social continuity will be strengthened and the conduct of those violating the rules is more easily prosecuted. The old saying that “Ignorance of the law is no excuse” rests on an important premise—the law must be published and accessible. The Internet has made much of the content of the rule of law even more accessible. Jeffrey Ritter

The country and the jurisdiction is a key component for knowing the law.  It is in the day of the Internet even more accessible.  Building and achieving trust in an organization, company enterprise or governance body has several tools at their disposal to assist them in the enforcement mechanism.  One of those is an independent panel or group of outsiders who are convened to discover evidence.

A Board of Directors is comprised of both individuals inside the company and outside to help guide the organization.  In a private company, this "Board of Directors" make decisions on the evidence of data and make informed decisions to govern the enterprise.  Some of these decisions may involve what products and services to develop or what people should be selected or released from certain duties and responsibilities.

In the public sector, there is another mechanism that can be utilized, A Grand Jury.  The Fifth Amendment to the Constitution of the United States reads, "No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a grand jury..."

A grand jury is a legal body that is empowered to conduct official proceedings to investigate potential criminal conduct and to determine whether criminal charges should be brought. A grand jury may compel the production of documents and may compel the sworn testimony of witnesses to appear before it. A grand jury is separate from the courts, which do not preside over its functioning.[1]
What is one example of a notable case where a Grand Jury was used in the process of the rule of law:

The second Watergate grand jury indicted seven lawyers in the White House, including former Attorney General John Mitchell and named President Nixon as a "secret, unindicted, co-conspirator." Despite evading impeachment, Nixon was still required to testify before a grand jury.

An environment of trust includes a vital component of transparent and accessible rules. When there is a reason to discover the truth, we look to the governance factors of those rules. Then we look at the clear evidence, the data to determine the correct course of action in our inquiry.  A Board of Directors or a Grand Jury provides guidance on whether a particular case should be referred to a legal process in a particular jurisdiction.  The rules are clear.  Trust is preserved.

What are the outcomes and benefits of effective Operational Risk Management (ORM):

1. Reduction of operational loss.
2. Lower compliance/auditing costs.
3. Early detection of unlawful activities.
4. Reduced exposure to future risks.

ORM is a continual process that when utilized effectively will provide the four benefits described.  Why any governance organization or body that it interested in transparency and building trust would ignore the process is questionable.

ORM includes legal risk.  This is why the General Counsel of private sector companies include the GC in the team that helps to effectively govern the organization.  They understand the rule of law and the requirement for transparency and factors needed to achieve integrity and trust.

Now think about your organization, your jurisdiction and the process you are utilizing to ensure more effective TrustDecisions.  What can you do different?  What will you do to make it better?  How will you provide the best use of the rules to effectively ensure the integrity and governance of the system?

Here is just one example:

Over 60 people in the U.S. and India face conspiracy and wire fraud charges in the largest crackdown against a telephone scam ever, officials said.

Callers from centers in India posed as federal agents to threaten victims with arrest, imprisonment, fines or deportation if they didn’t pay up, according to an 81-page indictment unsealed Thursday.

At least 15,000 Americans lost more than $300 million collectively during the four-year scam, according to the feds. A Texas grand jury indicted 24 people from nine U.S. states, 32 people from India and five call centers in Ahmedabad, India, earlier this month.

Scrutiny: The Noun Missing From Your Culture...

The culture of your business or organization will continue to be the root cause of many of your most substantial successes.  Simultaneously, it will be one of the most significant factors in your potential downfall as a company.  Operational Risk Management (ORM) professionals at Wells Fargo and Booz Allen Hamilton, are still dissecting all of the evidence of their respective events.

"Managing Risk to Ensure Intelligence Advantage" is a theme that you may not have heard before, unless you are in the Intelligence Community.  There is one key principle that is worth emphasizing again at this point in time:

Ensure all work is subject to scrutiny.  Require conflict of interest-free peer review for all programs, projects and strategies.

This principle, that shall become pervasive across the culture of the organization, is imperative for several reasons.  The first is, that a culture really is a manifestation of the people and the behaviors that are normal in the organization.  The second is, that the culture shall strive to be a true mosaic of the best thinking and ideas from all the key stakeholders in the enterprise.  Not just one or two people from the top or a singular department.

Putting scrutiny to your work by others to review, is the beginning of new found discovery and transparency insight.  It is the foundation for building a more trusted operating environment, with as little bias as you can possibly have in a culture.  When an organization spins of out of control and becomes the latest case study on an Operational Risk failure event, you must learn from it.  Wells Fargo is just one recent example:

Some consumers may be shying away from Wells Fargo after learning that employees used customers’ information to open sham accounts, according to new figures reported by the bank.

The nation’s largest retail bank beat expectations when it reported more than $5.6 billion in profit for the past three months. But the bank’s earnings report also hinted that the Wells Fargo may have some trouble convincing people to open new accounts in the wake of the scandal.

The number of checking accounts the bank opened in September fell by 25 percent from the same time last year, the company reported Friday. Credit card applications filed during the month dropped by 20 percent from a year ago. And the number of visits customers had with branch bankers also fell by 10 percent from last year.  Washington Post

Whether you are in the international banking and finance business, the defense industrial base or any other set of critical infrastructure institutions that public citizens are counting on, there is no room for a runaway culture.  Consider this definition:

scrutiny

noun, plural scrutinies.

1. a searching examination or investigation; minute inquiry.

2. surveillance; close and continuous watching or guarding.

3. a close and searching look.

You see, the integrity and longevity of your "Trust Decisions" begins with the sharing of relevant information.  Sharing that information with your most trusted and significant partners is the start. The beginning of a dialogue with people in your culture who continuously review the information, the new strategy. This begins the ongoing process. It is now time for others to look at your idea, your strategy, your policy rule, from their perspective. From their knowledge-base. To scrutinize it. To analyze it. To make sense of it for them and those affected by it.

The truth is, you don't have all the understanding and you don't have all of the ecosystem knowledge. You don't have the entire data set, to know if the specific work you have been doing is sound and correct. That the new work you have designed, is culturally and morally acceptable. That the outcomes of your project will produce the results imagined. That the strategy and the work, is the right thing to do at this point in time.

So how do you change? It begins with your next management meeting and beyond. If you are the leader, the manager, the director, the Vice-President or the CxO start now. Ask for scrutiny on your proposed strategy. Gain new insight and understanding. Ask for feedback and changes to make it better. Your power in the culture and its impact is your greatest weakness. Your people will follow you, unless you challenge them to think differently...