Dave Yarin is a compliance and risk management consultant to senior management and directors of large and mid-size companies, and author of the soon to be published book, Fair Warning – The Information Within.
Yarin follows and researches news stories regarding ignored warnings that lead to bad business outcomes, along with the social psychology theories that explain why these warnings were ignored.
This week, Yarin shared with me insights into compliance and risk management, his forthcoming book, and leadership.
Q and A with Dave
Yarin
1. How does a compliance and risk management consultant help
senior managers of large and mid-size companies?
Yarin: There are two approaches; ideally proactive but also
reactive when necessary. Proactively, a compliance and risk management
consultant helps companies to set up world-class compliance programs that help
to mitigate risk by ensuring oversight of the compliance function, educating
employees, creating and updating written standards, investigating reports of
non-compliance, and implementing auditing/monitoring activities.
When an
instance of non-compliance has already occurred, a compliance and risk
management consultant can help the company to investigate the matter and assess
liability, advise on appropriate responses and mitigation steps, and work with
the company and legal counsel if necessary in litigation support and/or in
communicating with third-parties such as the government who may be
investigating the matter.
Compliance and risk management consultants can also
work with companies to assist with due diligence in acquisition transactions.
2. What is the typical engagement length of time with a
company?
Yarin: They vary. I've worked with companies on short-term
engagements that may last a few months - for example in helping to strengthen a
compliance program, or for several years when there is a government
investigation or when serving as a monitor or advisor pursuant to a government
settlement agreement.
3. After your engagement is done, who typically at a company
is the person to act or lead action in response to a warning?
Yarin: Typically, the Chief Compliance Officer, often in
connection with legal counsel, is the person who leads action in response to a
warning. Given this part of the Chief Compliance Officer's role, it's critical
that his or her function be independent of other functions within the company
(e.g. finance) so that he or she can investigate and respond to the warning
thoroughly and appropriately.
4. What is an example of an ignored warning that led to a
bad business outcome?
Yarin: Let's take the recent experience with General Motors as
an example. They had multiple warnings within the company for several years
that they were using a defective switch within cars that could lead to terrible
outcomes, yet they didn't act until it was too late, particularly for the
individuals who died or were injured in car accidents resulting from the faulty
switch. If you review the chronology and details of the matter, it becomes
clear that the reasons for the lack of response to these warnings goes well
beyond merely financial pressures.
5. What is the most prevalent reason warnings are ignored?
Yarin: The most prevalent reason that warnings are ignored is
that unfortunately, it's part of human nature that we're "hard-wired"
to either ignore warnings or not act on them. Social psychology offers multiple
reasons and support for why this is the case. Look at the social psychology
called "the normalization of deviance." It basically tells us that if
we engage in an activity or allow an activity to continue that we know may have
a bad outcome, yet initially one doesn't occur, we're lulled into a false sense
of security on this activity and will stop listening to warnings about it. It's
at the heart of many of the most newsworthy disasters and bad outcomes that
have occurred in the business world and elsewhere. It's almost as though we're
"playing with the odds" until something bad happens.
Another tendency
is for individuals and companies to over-focus on one item (e.g. sales, growth)
at the expense of other areas (e.g. safety, quality). The good news is that if
companies recognize this aspect of human nature, they can incorporate
activities into their business that can help to both listen to and respond
appropriately to credible warnings.
6. What prompted you to write your forthcoming book, Fair
Warning?
Yarin: I remember back when the Space Shuttle Challenger
exploded in 1986, and being horrified not only by the loss of the 7 astronauts,
but also to learn that in the months that followed, an engineer at Morton
Thiokol was warning his supervisors and NASA about the very problem that caused
the shuttle to explode, yet nobody acted upon his warnings, despite his
credentials and data that he presented. That story always stuck with me, but
I'd see the same thing happen again and again; the Bernie Madoff ponzi scheme,
the explosion of BP's oil rig in the Gulf of Mexico...and I searched for a
reason why fair warnings continued to be ignored. Eventually, I came upon the
social psychology theories that provided a deeper explanation to why this
occurs.
7. Why does one not hear much about your type of
consulting?
Yarin: I believe companies have woken up to compliance and risk
management consulting. Historically, businesses may have mistakenly viewed it
as a cost with no ROI, but in today's highly-regulated world, and with the risks
to companies constantly growing and changing, there is an increased
appreciation of what good compliance consulting can offer to help a company.
8. Do you provide on-site speaking at companies interested in
compliance and risk management?
Yarin: Yes
9. When will your book be published?
Yarin: I hope to have it published within the coming year.
Comments
Post a Comment