JPMorgan’s massive spending on controls underlines “aggressive” relations with regulators (Dodd Frank On Steriods )

JPMorgan’s massive spending on controls underlines “aggressive” relations with regulators

September 24, 2013 @ 9:08 pm

By Guest Contributor

By Henry Engler, Compliance Complete

NEW YORK, Sept. 24 (Thomson Reuters Accelus) – What was once a more consultative relationship between JPMorgan and its regulators has turned into an environment of aggressive demands to reshape the banking giant, say bankers.

With news the largest U.S. bank has settled one set of charges for $920 million and is bracing for more legal and regulatory scrutiny in the coming weeks and months, insiders say the most noticeable change has been the regulators’ use of “consent orders” to enforce wholesale changes across the institution’s risk management controls and systems.

“It is an increasingly aggressive environment with the regulators. All of the things they would like to see as a wish list are getting increasingly formalized legally,” said one senior banker. “It now becomes a must have, a must do.”

In an internal memo to employees this week [1], JPMorgan’s CEO Jamie Dimon noted that “we have dedicated more than $750 million to address several of our consent orders and assigned close to 5,000 people to ensure we meet or exceed all that is expected of us.” Among the consent orders the bank has to comply with, the “London Whale” $6.2 billion loss and deficiencies in its AML monitoring and systems are the most prominent.

The bank has said that, in total, it would spend $1.5 billion on managing risk and complying with regulations and plans to add $2.5 billion to its litigation reserves in the second half of the year in a push to fix its control problems.

On Thursday, the bank agreed to pay $920 million [2] in penalties in two countries to settle some of its potential liabilities from it “London Whale” losses last year, according to terms made public by regulators. The penalties include $300 million to the U.S. Office of the Comptroller of the Currency, $200 million to the Federal Reserve, $200 million to the U.S. Securities and Exchange Commission and 137.6 million pounds ($219.74 million) to the UK’s Financial Conduct Authority.

The Federal Reserve and other regulators, such as the Office of the Comptroller of the Currency (OCC), have typically issued MRAs (Matters Requiring Attention) in the supervisory process when bank practices deviate from sound risk management principles. For more urgent matters, regulators can resort to an MRIA – Matters Requiring Immediate Attention.

As a supervisory letter [3] from the Fed’s Board of Governors clarified earlier this year:

“MRIAs arising from an examination, inspection, or any other supervisory activity are matters of significant importance and urgency that the Federal Reserve requires banking organizations to address immediately and include: (1) matters that have the potential to pose significant risk to the safety and soundness of the banking organization; and (2) matters that represent significant noncompliance with applicable laws or regulations.”

Most recently, for large banks, MRAs have been centered in credit-risk-related issues (36 percent), operational risk (16 percent), BSA/AML (14 percent), consumer compliance (10 percent), and internal controls (8 percent), according to the 2013 Semiannual Risk Perspective survey [4] by the OCC.

But an increased use of consent orders signifies a shift that some say is prompted by repeated instances of cases where there is a breakdown of internal controls, particularly at some of the largest institutions. While regulators may have previously felt that the MRA approach would be sufficient, they now believe there is a need to take a tougher stance.

“In the past, when something was on the fence you could go either way; the definite trend now is to go formal,” said Julie Williams, managing director at Promontory Financial Group, and former chief counsel at the OCC. “I think that is the product of increasing instances of sensitive and concerning operational issues where regulators decide that it is necessary and appropriate to go with a formal response.”

Some industry observers also point to public criticism of regulators for not having been sufficiently tough with banks in the past, and that the rise of consent orders may be an effort to deflect those perceptions.

London Whale case opens the door

In JPMorgan’s case, bankers say that the loss within the Chief Investment Unit (CIO) has also given regulators the ammunition to call for sweeping changes across the organization, not only in the area of the bank where the controls broke down.

“If you have a point of vulnerability such as the London Whale it’s a point of entry to allow you to ask for a huge wish list,” said a banker familiar with the bank’s engagement with regulators.

The OCC’s consent order regarding the CIO included deficiencies in the unit’s oversight and governance of credit derivatives trading, risk management, valuation control processes, internal audit processes and model risk management practices. But in the OCC’s required actions, the consent order included language to specify that the bank must remediate the deficiencies and processes wherever such trading activities occur – not only in the CIO.

What regulators have often found is that a failure in one part of the institution was not specific to that unit or business, but systemic across businesses. As SEC Co-Director of Enforcement, George Canellos, said on Thursday [5], with regard to the $200 million penalty handed down to JPMorgan: “Today’s action makes clear that JPMorgan’s control breakdowns went far beyond the CIO trading book.”

Substance versus process

Whether regulatory demands to develop new, effective risk management systems and models will ultimately lead to better risk oversight remains an open question, argue some observers. While having better information and systems are important, risk management at the end of the day still relies heavily on human judgment. What you ultimately do with the information is what counts.

“The risk, of course, is that there is confusion between substance and process on the part of the regulators,” said another banker. “The irony to me is that if it was 2004 or 2003, and you had a handful of treasurers around and you asked who has the best risk reporting and metrics, I hate to say, it’s probably Lehman Brothers.”

(Please click on the links for: SEC order [6], Federal Reserve consent order [7]OCC consent order [8]Financial Conduct Authority Final Notice [9]Memo from Jamie Dimon[10] and JPMorgan news release [11].)

(This article was produced by the Compliance Complete service of Thomson Reuters Accelus [12]. Compliance Complete provides a single source [13] for regulatory news, analysis, rules and developments, with global coverage of more than 400 regulators and exchanges. Follow Accelus compliance news on Twitter: @GRC_Accelus [14])

[1] internal memo to employees this week:http://www.complinet.com/global/news/news/article.html?ref=166724

[2] $920 million: http://www.complinet.com/editor/article/preview.html?ref=166859

[3] letter: http://www.kc.frb.org/publicat/banking/membership/smb/13-06-25-SR13-13-Supervisory-Considerations.pdf

[4] survey: http://www.occ.gov/publications/publications-by-type/other-publications-reports/semiannual-risk-perspective/semiannual-risk-perspective-spring-2013.pdf

[5] Thursday:http://www.sec.gov/News/PublicStmt/Detail/PublicStmt/1370539820148#.UjsEw9KyCAg

[6] SEC order: http://www.sec.gov/litigation/admin/2013/34-70458.pdf

[7] consent order:http://www.federalreserve.gov/newsevents/press/enforcement/enf20130919a.pdf

[8] OCC consent order: http://www.occ.gov/static/enforcement-actions/ea2013-140.pdf

[9] Financial Conduct Authority Final Notice: http://www.fca.org.uk/your-fca/documents/final-notices/2013/jpmorgan-chase-bank-na

[10] Memo from Jamie Dimon:http://www.complinet.com/net_file_store/new_editorial/j/p/JPM_memo.pdf

[11] JPMorgan news release:http://investor.shareholder.com/jpmorganchase/releasedetail.cfm?ReleaseID=791729

[12] Thomson Reuters Accelus: http://accelus.thomsonreuters.com/

[13] provides a single source:http://accelus.thomsonreuters.com/solutions/regulatory-intelligence/compliance-complete/

[14] @GRC_Accelus: https://twitter.com/GRC_Accelus

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Marcellus Shale Exports Could Transform Global LNG Market

Marcellus Shale Exports Could Transform Global LNG Market

JULY 25, 2013 | 10:14 AM
BY 

The offshore loading pier at Dominion has not received a ship importing liquefied natural gas since January 2011.

LINDSAY LAZARSKI / WHYY/NEWSWORKS

The offshore loading pier at Dominion has not received a ship importing liquefied natural gas since January 2011.

In energy-hungry countries, all eyes are on Pennsylvania’s Marcellus Shale gas. In a dramatic shift from just five years ago, the U.S. is looking to export, instead of import natural gas. And if more natural gas starts getting shipped abroad, Pennsylvania’s Marcellus Shale could help change the global market for natural gas, and lighting homes in Tokyo.

The U.S. currently has two export terminals, one in Sabine Pass, Louisiana, and the ConocoPhillips LNG export terminal in North Cook Inlet, Alaska. The U.S. Department of Energy just gave preliminary approval for ConocoPhillips to expand its Freeport, Texas import terminal to export liquefied natural gas. About 17 other export proposals now await approval by the DOE, including the Cove Point liquefied natural gas import terminal operated by Dominion Resources.

 

Lindsay Lazarski / WHYY/Newsworks permalink

The offshore loading platform (background) as seen from the Cove Point Lighthouse.

THE “SWEET SPOT” YIELDS A GLUT

In areas of northeast Pennsylvania, drillers say they’ve hit the “sweet spot.” In a drill rig several stories up above a Susquehanna County forest, gas workers guide a giant diamond drill bit, about the size of a basketball, as it cuts through the rock thousands of feet below. Steve MacDonald is in charge of this operation for Cabot Oil and Gas.

Cabot Oil and Gas public relations officer George Stark with a drill rig worker outside of the "dog house."

SUSAN PHILLIPS / STATEIMPACT PENNSYLVANIA

Cabot Oil and Gas public relations officer George Stark with a drill rig worker outside of the “dog house.”

“This is what we call our dog house, this is the command center of our operations up here,” says MacDonald. “This is our driller Mr. Reed here. He shows you how fast we’re drilling, how fast we’re pumping so he understands what’s going on downhole.”

Downhole in places like this Cabot Oil and Gas well, the company has struck gold, so to speak. Cabot’s natural gasproduction volumes and profits soared in 2012, exceeding all expectations.

And because of wells like these in Pennsylvania’s Marcellus Shale formation, a glut of natural gas has developed nationwide.  Domestic prices for natural gas have dropped about one-third, since July, 2008 before the shale boom really took off.

But overseas, prices are three or four times that.  So drillers here want to ship their gas abroad. The economist for the American Petroleum Institute, John Felmy says exporting Marcellus Shale gas makes sense.

“Because it’s such a vast deposit,” says Felmy, “and developing it, of course, can be used to supply other states as we’re doing now. But there’s likely to be so much of it that exporting it at a very good price would help in terms of keeping production going.”

API’s John Felmy talks to StateImpact Pennsylvania about exports.

As the price has dropped, production in some of Pennsylvania’s gas fields has tailed off.

PIPELINES LEAD TO IDLED IMPORT TERMINAL

In what some call a stroke of luck, the wells across Pennsylvania could easily be connected to an existing interstate pipeline system, which links up to a nearby import terminal.

One of seven holding tanks at Dominion's Cove Point Liquefied Natural Gas Terminal.

LINDSAY LAZARSKI / WHYY/NEWSWORKS

One of seven holding tanks at Dominion’s Cove Point Liquefied Natural Gas Terminal.

That import facility lies about 320 miles south of Susquehanna County, on a spit of land jutting out into the Chesapeake Bay, where large white cylindrical tanks are surrounded by a network of 32-inch pipes. The Cove Point liquefaction plant is operated by Dominion Resources. And Dominion also owns and operates a pipeline system that connects these tanks to Pennsylvania’s gas fields. It was only a couple of years ago when plans for that system were to use it for storage and transport between different markets on the East Coast. Today, the company wants to reverse the flow, transporting shale gas to their export facility in Lusby, Md.

The onshore liquefaction plant sits surrounded by a nature preserve. To get to the offshore dock, visitors have to head down into a tunnel and use a bicycle to travel beneath the water to the pier that lies out in the middle of the Chesapeake Bay.

Before any natural gas gets shipped overseas, it has to be cooled to minus-260 degrees Fahrenheit, the point where it becomes liquid. Export plants that liquefy the gas cost billions of dollars to build. So what they want to do at Cove Point’s idled import facility is spend the relatively bargain basement price of $4 billion converting it to an export facility.

The last time a ship docked at this pier was on New Years Day of 2011. Since then, the seagulls have moved in and made it home.  Hideaways beneath large pipes hold nests with chirping chicks. A nearby dump provides scraps of food, which the nesting birds bring back safely to this deserted pier, leaving the white-washed dock littered with chicken bones and bird poop.

Liquefied natural gas technician Ernest Ortiz monitors the process from the offshore control center.  Ortiz says he would love to start seeing ships coming to the dock. The last one to unload LNG was on New Years Day, 2011.

LINDSAY LAZARSKI / WHYY/NEWSWORKS

Liquefied natural gas technician Ernest Ortiz monitors the process from the offshore control center. Ortiz says he would love to start seeing ships coming to the dock. The last one to unload LNG was on New Years Day, 2011.

Dominion Resources spokesman Dan Donovan says this facility would make one of the best places in the U.S. to export natural gas.

“We have a world class dock and pier,” says Donovan. “We have the storage, we have a pipeline into what is now the second largest natural gas field in the world.”

Donovan’s point about the pipelines is key.

The company’s plan for their pipeline system used to be to pump imported natural gas to states like New York, New Jersey and Ohio. But their plans have changed almost overnight.

“No one saw this coming,” says Donovan.

FUKUSHIMA AND THE SHALE GAS REVERSAL

And Dominion wasn’t the only industry player surprised by Marcellus Shale production.

Wolfgang Moehler is the director of global LNG, the shorthand for liquefied natural gas, for the firm IHS Global.

“[The years] 2007, 2008, the assumption was that the U.S. would become, in the next ten years, the largest gas importers in the world,” says Moehler.

But today, that assumption has been turned on its head, thanks in part to all those productive Marcellus Shale wells, and the March, 2011 nuclear disaster in Japan.

Japan’s energy situation changed dramatically back in March 2011. Before the meltdown at the Fukushima Daiichi plant, nuclear energy supplied a third of Japan’s needs. Where it once had 50 nuclear reactors, today the country is down to just two.

Photo taken from a Kyodo News helicopter over the town of Okuma, Fukushima Prefecture, shows the Fukushima Daiichi Nuclear Power Station on July 9, 2013. Tokyo Electric Power Co., the operator of the crippled plant, said the same day that the density of radioactive cesium in groundwater by the sea at the plant has soared to around 90 times higher than three days ago.

KYODO/LANDOV

Photo taken from a Kyodo News helicopter over the town of Okuma, Fukushima Prefecture, shows the Fukushima Daiichi Nuclear Power Station on Tuesday, July 9, 2013, more than two years after the meltdown. Tokyo Electric Power Co., the operator of the crippled plant, said the same day that the density of radioactive cesium in groundwater by the sea at the plant has soared to around 90 times higher than three days previous.

Analyst Wolfgang Moehler is watching a dramatic shift in the global LNG market, partly due to increasing energy needs in developing countries like India, and the loss of nuclear energy in Japan.

“So a significant amount of that electricity production had to be substituted from fossil fuel generation,” says Moehler.

Japan was already the world’s largest importer of natural gas, but since Fukushima, the pace has increased steadily. Moehler says Japan would love to snag some of that cheaper American gas coming from Pennsylvania’s gas fields. And Pennsylvania’s gas producers would love to sell at a higher price.

He explains that importing nations like Japan are locked into long-term natural gas contracts tied to the price of oil.

“The emergence of the U.S. now as a potential exporter opened up a competition,” said Moehler. [Energy companies in countries like Japan] could also go back to their traditional producers and say well we have a different opportunity, we have to renegotiate the price. So Fukushima has a very very strong impact on Japan’s decision making in that regard.”

SHIFTING GLOBAL LNG MARKETS

Photo shows the inside of the world's largest liquefied natural gas tank in Yokohama near Tokyo, unveiled by Tokyo Gas Co. on March 13, 2013.

KYODO/LANDOV

Photo shows the inside of the world’s largest liquefied natural gas tank in Yokohama near Tokyo, unveiled by Tokyo Gas Co. on March 13, 2013. Japan’s imports of LNG hit a monthly record of 8.23 million tons in January.

But Dominion Resources still has a number of hoops to jump through before it starts piping in Marcellus gas, liquefying it, and shipping it out. IHS analyst Wolfgang Moehler says despite current contracts with neighboring countries like Australia and Indonesia, it may still be cheaper for Japanese energy companies to pay for the Cove Point conversion, and the extra transportation costs of shipping LNG through the Panama Canal to the Pacific rim. This is how good a deal Marcellus Shale gas seems to companies in Japan. Sumitomo Corporation, a Japanese trading company and its U.S. affiliate Pacific Summit Energy, has agreed to help foot the almost $4 billion bill to convert Cove Point to a natural gas export terminal. That company, along with the U.S. affiliate of India’s GAIL Ltd., have signed 20-year service agreements with Dominion to provide natural gas. Sumitomo has since announced that the exported gas would be sold to Tokyo Gas and Kansai Electric Power.

First, the U.S. Department of Energy has to approve any deals with non-free-trade countries, and determine if they’re in the public good. Dominion’s Dan Donovan says they’re pretty confident their proposal will gain approval from the DOE. The Federal Energy Regulatory Commission also has to weigh in. The state of Maryland has to issue about 30 different permits.

LNG EXPORT OPPONENTS

And not everyone is thrilled with LNG exports. American manufacturers don’t like the plan, because cheap natural gas has helped domestic factories become more cost-efficient.  They say exports would raise prices at home.

Listen to StateImpact’s interview with George Biltz of Dow Chemical.

On the environmental front the Sierra Club is challenging the Cove Point plan in court.

Sierra Club attorney Craig Segall says regulators should not turn a blind eye toward the impact of increased production in natural gas fields like Pennsylvania.

Cove Point Lighthouse sits within sight of the Cove Point LNG terminal.

LINDSAY LAZARSKI / WHYY/NEWSWORKS

Cove Point Lighthouse sits within sight of the Cove Point LNG terminal.

“So if that continues, you wind up making these really large national energy policy decisions,” says Segall, “not just here [in Cove Point] but cumulatively across all these terminals and never ask this serious question. This implies x percent increased methane emissions, y percent increased wastewater production, and as a result, increased wastewater capacity in the fracking states.”

Segall wants the federal government to study the larger upstream impacts.

Natural gas exports may be a good deal for drillers, their investors, and  landowners who leased their mineral rights. But Segall thinks more thought should be given to Pennsylvanians who get few of the benefits of drilling but most of the burdens.

So what would Segall say to someone living in Tokyo, facing rising energy costs?

“I think that’s absolutely the hardest question,” he told StateImpact.

Segall says renewables should be pursued. But in the meantime, he has no easy answer.

“But there’s always this question of equity,” he says. “There’s a question about how do we provide energy globally. And there’s the question about who suffers where energy is produced and who wins, upstream in Pennsylvania or anywhere along the supply chain.”

Segall also says the increased tanker traffic in the Chesapeake Bay could upset its already threatened ecosystem.

Dominion Resources says converting the Cove Point plant will create thousands of new jobs in Maryland and upstream in Pennsylvania.

The company expects the Department of Energy to make a decision on its application by the end of the year.

Creating A Compliance Culture Should Include: The CEO and The Board of Directors ?

At JPMorgan, Trying to Do the Right Thing Isn’t Enough

Michael Reynolds/European Pressphoto Agency

Stephen Cutler, center, formerly the chief of enforcement for the S.E.C., is now on the receiving end of lectures from his successor.

 

By 
Published: September 20, 2013
  • As the Securities and Exchange Commission’s chief of enforcement from 2001 to 2005, the era of landmark fraud settlements with Enron, WorldCom and Tyco, Stephen Cutler earned a reputation as a tough and, at times, feared regulator. He was particularly dismayed by chief executives, chief financial officers, general counsels and compliance officials who, even if not directly implicated in wrongdong, created a culture in which it was ignored, tolerated, or even worse, tactily encouraged.

In a speech in 2004 to the General Counsel Roundtable, he said: “You’ve got to talk the talk; and you’ve got to walk the walk. Both are critical to maintaining a good tone at the top.” And he called for more accountability: “Hold all of your managers accountable for setting the right tone. That means disciplining or even firing them when they have failed to create a culture of compliance. Human nature being what it is, there will be those who break the rules. But if managers don’t do enough to prevent those violations, or let them go unaddressed for too long, then they should be held responsible — even in the absence of direct involvement in those violations.”

How times have changed.

As general counsel of JPMorgan Chase & Company, Mr. Cutler is now on the receiving end of the lectures, which this week came from George S. Canellos, a successor to Mr. Cutler and currently the co-chief of enforcement at the S.E.C. On Thursday, the S.E.C. and other regulators announced that JPMorgan had agreed to admit wrongdoing and pay nearly $1 billion in fines for its conduct in the “London Whale” matter, in which the bank’s chief investment office lost more than $6 billion and bank officials misled regulators about the losses. The S.E.C. faulted JPMorgan’s “egregious breakdowns in controls” and said that “senior management broke a cardinal rule of corporate management” by failing to alert the board to the full extent of the problem.

The S.E.C. didn’t name any of those senior managers, but made reference to the “chief executive,” who is Jamie Dimon. Mr. Cutler oversaw both the legal and compliance departments during those events. (Mr. Cutler no longer oversees compliance.)

And the London Whale affair isn’t JPMorgan’s only regulatory problem. The bank faces multiple other regulatory actions and investigations, ranging from manipulating energy markets, to mortgage-backed securities fraud, to failing to disclose suspicions about the Ponzi scheme operator Bernard Madoff, to conspiring to fix rates in the setting of the global benchmark interest rate informally known as Libor. As the allegations have mushroomed, JPMorgan has gone with almost dizzying speed from one of the world’s most admired banks to one tainted by scandal.

And all of this happened on Mr. Cutler’s watch. “You have to say, he didn’t run a tight enough ship,” said John C. Coffee Jr., a professor of law and expert in corporate governance at Columbia University. “It’s not just the London whale episode. I wouldn’t call that the crime of the century. But taken with everything else, the energy manipulation, the mortgage fraud cases, the Libor rigging, it suggests that there was not enough investment in compliance and the general counsel was not proactive enough. He’s done a very good job at defending the firm but not enough at preventing it in the first place.”

A lawyer whose company was an S.E.C. target during Mr. Cutler’s tenure said this week, “I have to admit to a certain amount of schadenfreude,” adding: “At the time, he did a lot of grandstanding about lawyers being gatekeepers and the moral compass for the organization and how we should have prevented all this. He sounded great on the soapbox. Now I’ve been following JPMorgan and it’s pretty ironic.”

This lawyer was among the many I contacted who didn’t want to be named. Indeed, I quickly realized that I was wasting my time trying to get people to offer unconflicted comments about Mr. Cutler or anyone else at the bank, since a) their firm represents JPMorgan; b) they represent someone for whom JPMorgan is paying the legal bills; or c) they’re trying to get into category a or b. James Cramer joked on CNBC’s “Mad Money” this week that JPMorgan should just buy the Manhattan law firm Paul, Weiss, Rifkind, Wharton & Garrison, famed for its high-stakes litigation practice.

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Brad S. Karp, chairman of Paul, Weiss, worked with Mr. Cutler when he headed S.E.C. enforcement and has represented JPMorgan in various matters over the years. “JPMorgan is fortunate to have Steve lead its legal function during this period of unprecedented regulatory activity,” he said. “Steve is an extraordinary talent, with absolute integrity, an unwavering ethical compass and seasoned judgment. There is no better general counsel on Wall Street.”

Speaking on background, nearly all the lawyers I interviewed praised Mr. Cutler’s judgment, experience and legal skills. He remains a trusted adviser to Mr. Dimon. And the lawyers stressed that no one person, not even the general counsel or head of compliance, can prevent all wrongdoing in a company the size of JPMorgan. As the country’s largest bank, it is only to be expected that it’s going to have its share of regulatory and compliance issues, the lawyers said.

Still, Mr. Cutler acknowledged that the array of regulatory issues at JPMorgan had been “humbling.” When I visited him this week at his office at the bank’s Park Avenue headquarters, there was a surprising atmosphere of hushed calm given that the bank had announced the settlement and acknowledged wrongdoing that morning. He told me he hadn’t changed the view he articulated as enforcement chief. “You have to get the culture right,” he said. “It’s critical. That was true when I was at the S.E.C., and now I’ve seen it from the inside. I totally believe this. But I’ve discovered that it’s necessary but not sufficient.”

Institutions like JPMorgan, he said, and their senior managers can never lose sight of execution. “Just because you haven’t had any problems doesn’t mean you can stop testing and auditing. You have to trust but verify.” To that end, JPMorgan said this week that it would spend an additional $4 billion and commit as many as 5,000 employees to compliance and risk-management functions, including a new office of oversight and control. “We made mistakes,” Mr. Cutler acknowledged. “But we’ve spent a lot of time on self-reflection. What lessons can we learn? How can we do better? We’re trying to implement that.”

Donald Langevoort, a professor at Georgetown University School of Law who has written about compliance issues, said, “JPMorgan is throwing manpower at the problem, but whether a body count can be effective remains to be seen.” He said he knows Mr. Cutler, “and I have confidence in him, and I’m sure he did whatever he could.”

The problem, from his vantage point, is that Wall Street attracts risk-takers, which is how banks like JPMorgan make money. “JPMorgan is by no means unique,” he said. “None of these big banks really want compliance people causing traders and investment bankers to second-guess themselves too much because that gets in the way of making money. No one will say this, but it’s more effective to run the risk of noncompliance and pay a few fines, which is just a cost of doing business.”

Mr. Cutler disputed that: “I can’t tell you the number of times I’ve heard Jamie Dimon tell someone to do the right thing, and I don’t care what it costs.”

Mr. Cutler said that two of his “proudest days” as general counsel were May 10 of last year, when JPMorgan publicly disclosed the London Whale problem and acknowledged that it was the result of a badly conceived, executed and vetted trading strategy, and two months later, on July 13, when the bank told investors what had gone wrong and restated its first quarter results. “People and companies will inevitably make mistakes,” he said. “So the question is, how do you deal with it? We may not have been perfect, but we tried to get it right.”

Is Keystone Doomed To Be a Historical Footnote?

Is Keystone Doomed To Be a Historical Footnote?

By Ben Winkley Wall Street Journal

WHO NEEDS KEYSTONE, ANYWAY?

As 2013 rolls on from summer into fall there is still no end in sight to one of the great energy impasses of the year—will the Keystone XL pipeline ever be approved, or is it fated to become a historical footnote?

The pipe, in case you have forgotten, is planned to allow 830,000 barrels a day of heavy crude to move from Canada’s oil sands development all the way to refineries on America’s Gulf Coast.

Keystone needs approval from the State Department because it crosses the Canadian-U.S. border. The debate on whether it is a good idea or not has seemingly been endless and a decision may not now be made until 2014.

U.S. refiners increasingly doubt that Keystone will ever be built, The Wall Street Journal’s Ben Lefebvre reports. Only now, thanks to the expansion of other pipelines, the record amount of oil being produced in the U.S. and the rapid expansion of crude-by-rail, they don’t particularly care.

Which is all well and good for American refiners—and probably for these seven adorable species threatened by Keystone—but potentially ruinous for Canadian drillers.

Extracting Canada’s huge deposits of oil sands in the next few years might not be economically viable without Keystone XL. Oil-sands production capacity is predicted to more than double by 2030, to more than 5 million barrels a day—if Keystone doesn’t happen, output could exceed shipping capacity as soon as 2016.

This will mean that Canadian heavy crude will continue to trade at a steep discount to other grades of oil for the next few years, which could weigh on the economics of developing the oil sands.

So Canada hopes to build some pipes of its own—one all the way from Alberta to the Atlantic coast, and one to the Pacific. The former faces the challenge of scale; the latter of local opposition.

If Canada gets one or both of these off the ground, however, it could mean that Keystone turns out to be a lot of fuss over nothing. A lifeline could be thrown its way, though. The U.S. Federal Railroad Administration has begun an investigation into the business of moving hazardous materials—read: crude oil—on the tracks in light of the fatal accident in Quebec earlier in the year.

Any new safety measures or restrictions (say, on moving crude through residential areas) could increase the cost of moving oil-by-rail, and make that pipeline look a more attractive option once more.

INDIA BETWEEN A ROCK AND A HARD PLACE

India is considering a plan to reduce its ballooning current-account deficit that includes holding its oil imports from Iran steady, potentially putting the country in jeopardy of losing an exemption from U.S. sanctions against countries that do business with Iran.

The subcontinent is stuck between a rock and a hard place. Its currency, the rupee, has recently hit record lows against the U.S. dollar, making crude-oil imports much more expensive.

India imports more than three-quarters of the crude oil it requires, and the depreciating local currency would make those imports more expensive in rupee terms and add to the costs of government fuel subsidies.

India is turning to the Middle East, looking for deals. Oil exporters are eager to boost supplies to India to compensate for shrinking U.S. demand.

India and Iraq are working toward a 10-year oil-supply deal and the former may offer a stake in state-run India Oil Corp.’s planned refinery in the east of the country, the Journal’s Saurabh Chaturvedi and Biman Mukherji report.

Dealing with Iran will prove more contentious. India buys oil from the Islamic Republic by depositing rupees into a bank account, and then Iran imports Indian goods, potentially including food, drugs, consumer products and auto parts, debiting rupee amounts from the same account.

A bizarre ongoing dispute over an Indian oil tanker that was detained by Iran’s navy threatens to stall negotiations, but India may feel its need for fuel is greater than America’s need to squeeze Iran.

Deloitte survey: Financial institutions increasing focus on risk management

Thursday 22, August 2013 by Robin Amlôt

Deloitte survey: Financial institutions increasing focus on risk management

 

Heightened regulatory scrutiny and greater concerns over risk governance have led financial institutions to elevate their focus and attention on risk management, a new global survey from Deloitte finds. In response, banks and other financial services firms are increasing their risk management budgets and enhancing their governance programs.

 

According to Deloitte’s eighth biennial survey on risk management practices, titled “Setting a Higher Bar,” about two-thirds of financial institutions (65 per cent) reported an increase in spending on risk management and compliance, up from 55 per cent in 2010.

 

A closer look at the numbers finds, though, that there is a divergence when it comes to the spending patterns of different-sized firms. The largest and the most systemically important firms have had several years of regulatory scrutiny and have continued their focus on distinct areas like risk governance, risk reporting, capital adequacy and liquidity. In contrast, firms with assets of less than $10 billion are now concentrating on building capabilities to address a number of new regulatory requirements, which were applied first to the largest institutions and are now cascading further down the ladder.

 

“The financial crisis has led to far-reaching major changes of doing business in financial institutions’ risk management practices, with stricter and ruled based regulatory requirements demanding more attention from management and increasing their overall risk management and compliance efforts,” said Joe El Fadl, Financial Services Industry Leader at Deloitte Middle East. “That said, risk management shouldn’t be viewed as either a regulatory burden or a report destined to gather dust on a shelf. Instead, it should be embedded in an institution’s framework, philosophy and culture for managing risk exposures across the organisation.

“Knowing that a number of regulatory requirements remain in the queue, financial institutions have to be able to plan for future hurdles while enhancing their risk governance, enhancing management capabilities with better risk awareness using data analytics, and improving in data quality,” added El Fadl. “Those that do will be well placed to steer a steady course though the ever-shifting risk management landscape.”

The majority of the institutions participating in the survey (58 per cent) plan to increase their risk management budgets over the next three years, with 17 per cent anticipating annual increases of 25 per cent or more. This is not a trivial matter as 39 per cent of large institutions – particularly those based in North America – reported having more than 250 full-time employees in their risk management function.

 

Risk management moves up the boardroom agenda

Alongside increased spending, risk management has also significantly risen up the agenda in the boardroom. According to the survey’s results, 94 per cent of company boards now devote more time to risk management oversight than five years ago, and 80 per cent of chief risk officers report directly to either the board or the chief executive officer (CEO). Additionally, 98 per cent of company boards or board-level risk committees regularly review risk management reports, an increase from 85 per cent in 2010.

 

“Regulators have been focusing more and more on the role of the board of directors in risk governance, engaging them to approve the institution’s risk appetite and risk policies, overseeing their implementation by management and increasingly looking to understand the challenge that the board makes in its oversight of the financial institution’s risk management of key issues,” said Fadi Sidani, partner in charge, Enterprise Risk Services at Deloitte Middle East.

Other major findings in the survey include:

Almost three out of four risk managers rated their institution to be either extremely or very effective in risk management overall, an increase from 66 percent in 2010’s survey results.

 

The impact of increased regulation is having a significant effect on business strategy and the bottom line, with 48 percent of firms confirming that they have had to adjust product lines and/or business activities, a percentage that doubled from 24 percent in 2010.

The use of institution-wide enterprise risk management (ERM) programs is continuing to grow. Today, 62 percent of financial institutions have an ERM strategy in place, up from 52 percent in 2010, while a further 21 percent are currently building a program. The total of 82 percent of firms either with or building an ERM program is significantly up from 59 percent in 2008.

 

Institutions are increasingly confident about their effectiveness in managing liquidity risk (85 percent rate themselves as extremely or very effective vs. 77 percent in 2010); credit risk (83 percent against 71 percent in 2010); and country/sovereign risk (78 percent vs. 54 percent in 2010).

 

Stress testing has become a central plank in many institutions’ risk management efforts. Eighty percent of the institutions surveyed stated that stress-testing enables a forward-looking assessment of risk, and 70 percent said that it informs the setting of their risk tolerances.

Technology used to monitor and manage risk is a particular concern and, according to the report, significant improvements in risk technology are needed. Less than 25 percent of institutions rate their technology systems as extremely or very effective while 40 percent of institutions are concerned about their capabilities in the management of risk data.

 

Progress in linking risk management with compensation has changed only incrementally since 2010’s survey results. Currently, 55 percent of institutions incorporate risk management into performance goals and compensation for senior management, which is little changed from 2010. The use of “clawback” provisions in executive compensation, however, has increased (41 percent vs. 26 percent of institutions in 2010).

 

“Financial institutions are becoming increasingly confident in their risk management abilities, but they also recognize where there are gaps,” said Sidani. “Where concerns linger particularly is around operational risk, with a number of recent headlines – like management breakdowns and large-scale cyber-attacks – underscoring the important impacts this area can have on an institution’s reputation. This is a gap that may trigger significant operational risk combined with reputational risk that needs to be properly addressed.”

According to the report, operational risk, which is a key component of Basel II, has been a continuing challenge for institutions. The lack of ability to measure operational risk and the complexity of many operational processes are key causes of this. Only 45 per cent of firms rated themselves as extremely or very effective in this area, down slightly from 2010.

 

Deloitte’s survey assesses the risk management programs, planned improvements, and continuing challenges among global financial institutions. The eighth edition surveyed chief risk officers – or their equivalent – at 86 financial institutions, and represents a range of financial services sectors, including banks, insurers, and asset managers, with aggregate assets of more than $18 trillion. The survey was conducted from September to December 2012.

 

The report may be viewed at http://www.deloitte.com/us/globalrisksurvey

 

Banks Replacing Enron in Energy Incite Congress as Abuses Abound

 

Banks Replacing Enron in Energy Incite Congress as Abuses Abound

 

The U.S. government permitted Wall Street firms to expand in the energy industry a decade ago, when the collapse of Enron Corp. and its army of traders left a void in the market. The results aren’t pretty.

 

JPMorgan Chase & Co. (JPM) settled Federal Energy Regulatory Commission claims this week that employees engaged in 12 bidding schemes to wrest tens of millions of dollars from power-grid operators. A Barclays Plc (BARC) trader stands accused of bragging he “totally fukked” with a Southwest energy market. Deutsche Bank AG workers, faced with losses on a contract, allegedly altered electricity flows to make it profitable instead.

 

The FERC’s investigations are fueling a debate among lawmakers and the Federal Reserve over whether to reverse more than a decade of policy decisions that let Wall Street banks keep or build units handling commodities and energy. Senators examining the firms’ roles have said they may call bankers and watchdogs to a September hearing amid concern traders are abusing their ability to buy and sell physical products while betting on related financial instruments.

Banks have been seen as “sources of capital investment and market liquidity,” said Marc Spitzer, a partner at law firm Steptoe & Johnson LLP in Washington and a former FERC commissioner. “But the tradition and culture of large banks is different than the conservative and risk-averse culture of regulated utilities.”

 

Rolling Blackouts

 

JPMorgan, the largest U.S. lender, announced last week that it’s considering ways to exit the physical commodities business, which includes energy trading. The New York-based company, led by Chief Executive Officer Jamie Dimon, 57, will pay a $285 million fine and disgorge $125 million in gains to settle the FERC’s case without admitting or denying wrongdoing.

 

“We’re pleased to have this matter behind us,” Brian Marchiony, a spokesman for the firm, said as the accord was announced.

 

“It is up to Congress, and not FERC, to decide if banks should continue to be allowed to participate,” FERC Chairman Jon Wellinghoff said in an e-mailed statement. “We welcome anybody in the markets who wants to play in those markets fairly, whether it be banks, traditional utilities or other traders. We just want to make sure that they play by the rules.”

 

Details of Enron’s market abuses surfaced in the years after the world’s biggest power trader collapsed in an accounting fraud in 2001. The company, whose actions led to rolling blackouts in California, eventually reached a $1.5 billion settlement with state authorities, while employees pleaded guilty to criminal charges.

 

Enron’s Void

 

To prevent future misconduct, a congressional overhaul of U.S. energy policies gave the FERC additional enforcement powers in 2005, setting the stage for the current jump in cases.

 

Enron’s fall left a hole in the market. Utilities and companies needed more stable and dependable power brokers for their transactions. Banks, with relatively strong balance sheets and credit ratings, were among companies that saw an opportunity. Congress already had loosened energy-market restrictions in the 1990s, as well as a ban on banks’ involvement in commercial businesses in 1999. Regulators let firms proceed.

 

UBS AG (UBSN), Switzerland’s largest lender, bought Enron’s energy-trading business in 2002, later shrinking the unit. That same year, Bank of America Corp. also won the FERC’s approval to make electricity transactions. Altogether, more than 50 firms including banks filed applications with the FERC from December 2001 through February 2003 to make trades in that market.

 

Edison’s Backer

 

“Banks have assumed a prominent role in energy trading since the collapse of Enron and other energy marketers, in part, because financial institutions generally have significant financial assets to back their trades,” said Richard Drom, a partner at law firm Andrews Kurth LLP who focuses on energy regulation. “Such trading can improve energy markets by promoting market liquidity and energy price transparency.”

JPMorgan’s website credits a predecessor of the bank with helping bring about the advent of electricity by financing Thomas Edison’s research. In 2005, a unit of the company won FERC approval to provide power in wholesale electricity markets, according to the agency. Three years later, the firm inherited U.S. energy holdings and sales arrangements, including power plants in Southern California and Michigan, through its acquisition of failing investment bank Bear Stearns Cos.

 

The FERC found that J.P. Morgan Ventures Energy Corp., a unit overseen by commodities chief Blythe Masters, engaged in 12 separate bidding strategies from 2010 to 2012. Ten allegedly began while the agency’s probe was in progress.

 

Profits Predicted

 

The bank controlled older power plants that had marginal costs that were typically higher than the market prices of electricity, according to its consent agreement with the FERC. To ensure their profitability, the firm sought to exploit pricing rules, the agency wrote.

JPMorgan used strategies such as offering below-market rates for some hours of energy production, then charging exorbitantly high rates for hours that state bidders agreed to pay for the plants to “ramp” production, according to the FERC.

 

Masters, 44, was told in an October 2010 document that the firm’s bidding strategies would enable it to produce $1.5 billion to $2 billion in gains through 2018, according to the FERC. She wasn’t accused of wrongdoing. The company’s settlement releases her from any future FERC enforcement actions in the case.

 

Enron Worse

 

Some JPMorgan bidding tactics were similar to abuses that occurred in the Enron era, FERC Chairman Wellinghoff said in an interview this week.

“That doesn’t mean that they are as widespread or that they are resulting in the level of consumer losses that we saw during that period,” he said.

A recent jump in the watchdog’s cases targeting a variety of companies stems from the additional authority Congress granted its investigators in 2005. Wellinghoff has said that the agency isn’t seeking to single out Wall Street firms.

“We now have a very sophisticated and very deep enforcement team” able to identify and stop market manipulation swiftly, he said in the interview.

 

The FERC’s case against Barclays and Frankfurt-based Deutsche Bank centered on their alleged abuse of power-market influence to benefit related positions on financial instruments.

 

Barclays Fighting

 

At Barclays, the FERC’s investigators found traders made transactions in fixed-price electricity products — often at a loss — with the intent of moving an index to benefit the London-based bank’s other bets on swaps. The regulator’s staff estimated that the abuses, spanning 2006 to 2008, caused $139 million “in harm to the market.”

Barclays has said the FERC’s accusations are without basis. The firm has vowed to fight an order that it pay $469.9 million in penalties and forfeited profits. Swaps allow investors to hedge or speculate on changes in underlying assets such as interest rates, currencies or the ability of a borrower to repay debt.

 

Deutsche Bank agreed to pay the FERC more than $1.6 million in January without admitting or denying wrongdoing. The bank was accused of moving electricity to benefit its position on financial instruments known as congestion revenue rights.

Enron employees targeted by prosecutors took a direct approach: They sought to drive up electricity prices to squeeze more money out of power-starved utilities, businesses and consumers. Wholesale power prices soared and electricity supplies dwindled, leaving millions of Californians to suffer blackouts in 2001. The state’s two largest utilities became insolvent.

 

Enron Testimony

 

The focus on derivatives in some of the bank probes echoes at least one Enron case. In 2004, Enron settled claims brought by the Commodity Futures Trading Commission that employees rapidly bought up natural gas in the spot market, creating “artificial” prices for natural gas futures contracts.

That behavior helped make Enron a repeat topic during a Senate Banking Committee subcommittee hearing on July 23 to examine whether banks are abusing their roles in commodities markets.

 

“There is at least a very plausible argument that Enron was the pioneer in discovering a business model” that combined the handling of physical commodities and derivatives bets, Saule T. Omarova, a law professor at the University of North Carolina at Chapel Hill, told the Senate panel. “Once that model was discovered, that model was up for the taking.”

The notion that some firms are emulating Enron “suggests that this movie does not end well,” Senator Elizabeth Warren, a Massachusetts Democrat, said at the hearing. It shows “we are now putting more and more risk into this system.”

 

‘Grandma Millie’

 

The cases against banks in the past year have resurrected concerns that traders are disregarding markets and consumers.

Enron workers were caught on audiotapes as they discussed tactics with code names like “Death Star” and “Fat Boy” that could be used to take advantage of consumers, whom they termed “Grandma Millie.” In that case, prosecutors said employees used a variety of strategies, such as creating artificial congestion on transmission lines so that Enron could earn additional fees for relieving the crunch.

One Barclays trader accused of manipulating prices in the U.S. Southwest wrote in an internal message that he had “totally fukked with the Palo mrkt today,” the FERC said in an order this month. Another trader wrote that he was “trying to drive price in fin direction,” referring to transactions he made to benefit derivatives positions, the agency said.

At Odds

 

The claims against banks are fueling a regulatory debate that may push those firms back out of certain markets. The Fed said July 19 that it’s reviewing a 2003 decision that physical commodities are “complementary” to banking, allowing lenders such as JPMorgan to operate in both industries. Such a reversal would demonstrate authorities’ growing discomfort with allowing complex trading strategies into markets that ultimately heat people’s homes.

 

Banks’ and utilities’ interests are fundamentally at odds, with financial firms earning more from volatility and consumers needing stability, said Miki Kolobara, a Phoenix-based attorney who specializes in energy-trading cases. Banks’ hunt for gains will gravitate to derivatives, where profits are theoretically unlimited, rather than in power lines and physical infrastructure, where returns are capped by regulators, he said.

 

Electricity and natural gas — the two main commodities under the FERC’s oversight — are areas in which banks should tread carefully, because the government is wary of practices that hurt people’s ability to meet basic needs.

“Trading in energy requires not just expertise, but also an awareness of a highly complex regulatory structure,” said Harvey Pitt, the SEC chairman during Enron’s collapse. “If traders view energy as just another commodity, then they will find themselves on the wrong side of FERC.’”

 

To contact the reporters on this story: Keri Geiger in New York at kgeiger4@bloomberg.net; Brian Wingfield in Washington at bwingfield3@bloomberg.net

 

To contact the editors responsible for this story: David Scheer at dscheer@bloomberg.net; Christine Harper atcharper@bloomberg.net; Jon Morgan at jmorgan97@bloomberg.net

 

Eight Ways to Move Toward a Culture of Compliance

Originally Published June 7, 2013, 12:01 AM ET

Eight Ways to Move Toward a Culture of Compliance

More than just a set of policies and procedures, effective compliance risk management at the enterprise level can be viewed as a cultural ethic that should function like any other business asset that reaches across an organization. An effective way to get there is through a risk intelligent framework that brings compliance into the open, running throughout all business processes, with responsibility shared among all employees.

“A risk intelligent framework can be a radical shift from the way most companies see compliance today,” says Donna Epps, a partner and U.S. co-leader of Governance and Risk Management at Deloitte Financial Advisory Services LLP. “To move a company in that direction, the chief compliance officer will need to gain the backing and support of stakeholders from across the organization, including executive peers, business-unit and functional leaders, and the board of directors.”

Following are eight initiatives a Chief Compliance Officer (CCO), working with the CFO, can lead to help bring about a more holistic program of compliance risk management through a risk intelligent approach and elevate awareness at the enterprise level.

1. Get the Top Brass on Board

The road to holistic risk compliance can be much smoother if the CEO, CRO and the board of directors understand what the CCO is trying to do and why they should want to help. Risk intelligent compliance requires clear channels of communication between the compliance risk management program and the enterprise risk management (ERM) program, and the CRO’s engagement is critical. Luckily, the CRO’s shared interest in improving risk management effectiveness can make risk intelligent compliance a relatively easy sell.

The CEO’s role in supporting risk compliance is to empower the CCO with the authority needed to drive meaningful change, as well as to provide the necessary investment, political support, and, if needed, enforcement. Gaining the CEO’s support can require the CCO to make clear the risk management benefits of robust compliance processes, as well as collateral benefits of cost reduction and revenue enhancement. Any up-front investments must also be addressed early, such as the purchase of more effective technology to replace spreadsheet-based tracking and reporting.

The board of directors can play a role in holding management accountable for results of the enhanced programs. “The CCO’s task is to set expectations, develop metrics and establish milestones that are both substantive and realistic, as well as establish a multiyear master plan,” says Scott Baret, partner, Governance, Regulatory and Risk Strategies, Deloitte & Touche LLP, who also serves as global leader, Financial Services Enterprise Risk Services. “Many boards prefer to spend time on risk management rather than on compliance, so CCOs may want to consider framing board discussions in the context of ERM.”

2. Take the Company’s Bearings

Like any transformation, the pursuit of risk intelligent compliance begins with understanding the current state. Important questions include:

What are the company’s current compliance obligations and risks?

Who owns each risk?

What controls are in place against them?

How does the organization respond to control failures?

How are remediation priorities set?

What supporting technologies are used?

3. Develop the ERM-aligned Compliance Risk Management Program

Coordinating compliance risk management with ERM provides CCOs the operational basis for establishing, strengthening and validating the link between compliance and enterprise value. How a CCO accomplishes this at any particular company will depend greatly on internal organizational dynamics. “For insights on how to maintain effective cross-communication with ERM, the CCO may want to look at the way the internal audit function interacts with ERM to evaluate company risks,” says Mr. Baret.

4. Align the Compliance Function

The process of aligning compliance activities and investments with business priorities starts with the compliance function itself. The CCO should allocate the compliance function’s activities across the company’s compliance risks according to the relative importance of each compliance risk to enterprise value. In some cases, this may mean deploying people and infrastructure to countries, programs and/or activities where greater investment seems counterintuitive. In others, it may mean scaling back on one or more “sacred cows.” In either case, the CCO should be able to back up his or her decisions with reasons that tie solidly back to ERM priorities.

The corollary is that CCOs themselves should prioritize requests for investments in the compliance function based on their expected risk management benefit. Barring obvious infrastructural or resource gaps, the choice of what to ask for first may sometimes come down to a frank judgment call.

5. Lobby Hard for Effective Technology

The “right” technology and data architecture, both within and outside the compliance function, can go a long way toward improving compliance efficiency and effectiveness. Automating controls, for instance, can help lower costs and increase reliability, especially if the controls are first rationalized to reduce duplication. Companies can also avail themselves of a growing array of tools to support the compliance risk management process, some stand-alone, some sold as part of larger “enterprise governance, risk and compliance” solutions.

Some of the newer compliance tools feature: automated monitoring of regulatory releases; workflow capabilities to facilitate compliance process execution and tracking; and integrated “front end” interfaces that allow users to execute, document and track compliance activities in multiple areas from a single point of access.

6. Piggyback on Each Other’s Work

Looking for ways to reduce duplication of effort with other internal groups can help a CCO stretch the compliance function’s limited budget and resources. In particular, the CCO should enlist internal audit in supporting compliance oversight by testing and auditing compliance-related internal controls and business processes. Compliance personnel can advise internal audit on what tests would be most useful to the compliance function, as well as on what tests might be better left to the compliance function’s specialists to perform.

7. Foster a Culture of Compliance

Changing corporate culture can take years. CCOs should expect to work with the office of the CEO—as well as human resources, legal and communications—to supervise the change initiative and supply compliance-specific guidance as needed. Important areas to address include:

Performance management and compensation

Training

Leadership development

Communications

8. Participate in Strategic Planning

The risk intelligent CCO should help leaders set a strategy that takes compliance into appropriate account by bringing relevant compliance perspectives to the strategic planning process. For instance, the CCO should explain what compliance obligations are associated with each of the strategic options being considered, help evaluate the likely compliance risk associated with each option and describe the nature and extent of the investments that may be needed to maintain compliance risk exposures within acceptable tolerances under a variety of conditions. “Once the strategy is set, the CCO should help the company understand and prepare to address compliance obligations that are expected to arise in execution,” adds Ms. Epps.

Related Resources

Aligning Compliance Risk Management to Business Priorities

The Risk Intelligent Chief Compliance Officer

This publication contains general information only and Deloitte LLP and its subsidiaries (“Deloitte”) are not, by means of this publication, rendering business, financial, investment, or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor. Deloitte shall not be responsible for any loss sustained by any person who relies on this publication. Copyright © 2013 Deloitte Development LLC.