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Regulatory Preparation Depends on CEOs, Not on Who Wins the Election

Whether Donald Trump or Hillary Clinton becomes president will be a huge determinant in the U.S. government’s approach to regulatory enforcement over the next four or eight years. No matter who wins, however, there are some steps CEOs should take to improve their company’s position no matter what comes down the pike from the White House.

legislationThose are the two biggest pieces of advice for business leaders from Rich Girgenti, U.S and Americas leader for the forensic practice of KPMG and co-author, along with Tim Hedley, of the new book, The New Era of Regulatory Enforcement.

“To an extent, the new president will implement the platform that they’ve laid out, so that already provides some direction about where they might be headed,” Girgenti told Chief Executive. “But organizations need to invest wisely in risk management and [regulatory] compliance regardless, so that they’ll be better positioned whoever the next president is.”

Many CEOs are frightened at the prospect that a President Hillary Clinton would continue and even intensify the anti-business regulatory regime they say was unleashed by President Obama, which has included Dodd-Frank financial regulation, Obamacare and an aggressive agenda set by the Environmental Protection Agency.

At the same time, other CEOs are concerned about the uncertainty that might be created by a Donald Trump presidency, among other things. And while the Republican candidate has promised a regulatory apparatus that would go easier on business leaders in many ways, some corporate chiefs would be more comfortable with Clinton’s mien and policies.

“What is needed is clarity, consistency and simplicity, not only in regulatory regimes but in how companies are going to be held accountable if things go wrong.”

Regardless of who the new president is, Girgenti said that CEOs are concerned about the future of federal regulation. “What is needed,” he said, “is clarity, consistency and simplicity, not only in regulatory regimes but in how companies are going to be held accountable if things go wrong.”

In that regard, Girgenti said, one problem is that “each agency in the current environment has its own framework, and there are literally dozens of guidances out there” that, among other things, have resulted in “literally trillions of dollars of fines and penalties over the last 15 years that companies had to pay, not always knowing what they needed to do to avoid them.”

Girgenti advised that, apart from the business summits presidents have held with business leaders, the next president should hold a “regulatory” summit with “key leaders of business and CEOs in various industries, to meet with compliance and risk experts and government regulators and to try to provide some meaningful guidance” in this area going forward.

He pointed out that the history of federal regulation has found massive new schemes unfolding in both Republican and Democratic administrations, depending to a great degree on the events of the day as well as the president’s own bent toward regulation.

Whatever the future environment for regulation, Girgenti said, CEOs need to “adopt a framework for managing regulatory risk and building compliance programs so they’re better able to prevent, detect and respond to whatever might be areas of potential misconduct” and “in response to new regulations and enforcement that might be taking place.”

Specifically, Girgenti advised CEOs to:

Build a culture of integrity. “That’s the most important place for organizations to begin,” he said. “You can have the best policies and procedures in place, but if the culture isn’t strong in that way, you’re going to be hard put to manage all the risks.”

Invest enough resources. Too often, Girgenti said, companies “under-resource” their risk-management and compliance programs. Don’t make that mistake.

Embed the priority. CEOs need to ensure that a determination to better manage regulatory-enforcement risk is “embedded in the strategy and operations of the organization, beginning at the top” as well as within all the business units. “Compliance can’t just be a stand-alone function within an organization,” Girgenti said.

Harness data. It’s important for companies to use technology—particularly big data and analytics—to “begin to identify on a real-time basis the kinds of risk an organization faces, to be able to detect anomalies and outliers and potential areas of misconduct, and to get a sense from an enterprise-wide look at what areas of concern are.”

But of course, CEOs can do only so much to make sure their companies are girded against future regulatory initiatives. In a President Trump or President Clinton, there may be wild cards that no business leader could foresee.






About Dale Buss

Dale Buss
Dale Buss is a long-time contributor to Chief Executive, Forbes, The Wall Street Journal and other top-flight business publications. He lives in Michigan.