Call me an optimist — it is a much better alternative than being a pessimist or a “realist” with a pessimistic bent.  So, let’s start by acknowledging the obvious. 

Businesses are operating in a volatile environment.  The Trump Administration is moving fast, sometimes changing strategies from one day to another.  Businesses clamor for stability.  This is particularly important when it comes to trade policy and the impact of tariffs. 

As economic pressures or worries increase, there is a disturbing concern that spending and investment on compliance programs will be trimmed.  When seeking spending cuts, businesses may be tempted to turn to compliance and question the need for an executive leader with a commensurate salary to other C-Suiters.  This attitude is problematic and threatens to turn back the clock on compliance.

Two important trends appear to be cited — for some reason, businesses are over-reacting to DOJ’s announced “pause” in FCPA enforcement.  Most companies have interpreted this pause to signal a decline in enforcement and a “safe time” to cut back on compliance.  In some cases, businesses are letting the senior compliance executive go and demoting the head of compliance to a non-executive, director position.  While this is anecdotal, this practice, if carried out, will set compliance back years — if not decades.

Shortsighted business thinking is by definition ineffective.  Long-term and sustainable strategies are important, especially during this volatile time.  Most businesses understand that the current conditions are unlikely to last in the long term, and have been mindful to identify accurately their risks and plan accordingly. 

Businesses that cite the pause as a reason to cut back on compliance are misreading the situation — yes, FCPA enforcement has been stopped but other risks have increased, especially sanctions, export controls and import compliance.  Add to this mix, the threat of False Claims Act violations in the international trade context and you have a risk profile that begs every company to adjust their trade compliance programs, to increase investment in these important functions and avoid potential enforcement actions.

The Trump Administration is on a path where national security and enforcement actions will reinforce the importance of overall compliance.  This trend can have a devastating impact on a company’s reputation — just look at the harm that Ericsson suffered when it was alleged that Ericsson had paid ISIS bribes to facilitate transportation of cellular equipment through territories controlled by ISIS. 

Alternatively, businesses that rely on immigrant labor cannot afford to be the subject of an immigration enforcement action where the government alleges that the company is relying on illegal labor or worse yet, illegal immigrants that have terrorist connections or are being used to facilitate terrorist financing. 

These situations are not just theoretical.  Law enforcement plans to increase workplace raids and audits.  Companies need to prepare for such situations and the inevitable risks and negative impact.

Keeping this situation in mind, companies devoted to a short-term perspective could cause real harm to its culture and intangible reputation.  We all know that a company’s reputation in the marketplace is valuable and has to be protected.  Short-term compliance thinking often results in immediate harm with lasting consequences.  There are numerous examples of companies that adhered to such a strategy and in the end they lost — thier culture suffered, misconduct rates increased and enforcement risks sky-rocketed. 

Compliance should not take this situation lying down.  Speaking up can be demonstrated by compliance professionals.  Silence is this situation will only increase the possibility that leadership will point to compliance as a place to cut — such actions would be unfortunate.  To prevent such  disastrous result, it is important that the legal and compliance professions make sure that leadership understands the choices and the alternative paths.