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There are countless regulations and standards are in place, like obeying safety guidelines standards for payment of wages and pensions, etc. These laws protect a business from its agents, employees and other stakeholders, and vice versa. Therefore, any business ought to be in compliance with these regulations at all times. If they don’t, then they have to bear high costs and penalties of non-compliance. This is where ‘Corporate Compliance’ starts to play an essential role.

A failure to comply with rules and regulations especially when accompanied by huge penalties and adverse publicity can show the management of an organization in bad light. It can also erode share value and reduce the confidence that shareholders have in the company and its management. Hence banks need to avoid these situations at all costs.

1.Banks Fined US$321 billion since 2008 financial crisis

Compliance risk has become one of the most significant ongoing concerns for financial institution executives as well.The number of individual regulatory changes that banks must track on a global scale has more than tripled since 2011, to an average of 200 revisions per day. The tougher compliance environment has not only multiplied the various regulations that financial institutions must follow, but has also made it necessary for banks to think about compliance in an entirely different way.

Having said this, Banks across the globe have been fined a whooping $321 billion since 2008 for regulatory failings like money laundering, market manipulation and terrorist financing. Out of this, $42 billion have been paid as fines in the year 2016 alone. Managing these massive costs is a recurring burden for banks. The recurring years of fines have taken a heavy toll on the banks, wiping out the equivalent of 14 per cent of their equity capital.

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New regulatory topics continue to emerge, such as next-generation Bank Secrecy Act, Anti-Money Laundering, risk culture, subcontractors risk. Changing values and ethical standards are already re-framing banks’ business judgments and individual executive’s decision making. This is because legitimacy is gaining more importance that lawful.

Sustainable Compliance Principles

To enable a more sustainable compliance model, banks should adopt a compliance-risk framework incorporating these 4 principles;

  • Shaping the overall risk culture – Banks need to transform the role of the compliance department from serving as an advisory to having direct influence on risk management and monitoring. Compliance specialists need to incorporate rules and regulations into the bank’s operational workflow.
  • Transparency in all material risk exposures – The new compliance approach should tie all regulatory requirements to specific business process breakpoints and then enable effective oversight and remediation.
  • Integrate compliance with bank’s operational risk – Banks should develop an integrated inventory of operational and compliance risks. They should also standardize risk, control taxonomies. Banks should coordinate risk assessment, remediation, reporting methodologies and calendars. Clarifying roles and responsibilities among control functions for each material risk type helps to ensure there are no gaps or overlaps.
  • Top-down monitoring – An institution should monitor progress in raising the stature of compliance; creating an integrated view of all risks; achieving a strong risk culture; risk ownership; a risk-based program to assess compliance risks; use of quantitative metrics and qualitative markers to measure compliance risk; and evidence of the first line of defense taking action and owning compliance and control issues.

The traditional compliance model was designed in a different era and with a different purpose in mind, largely as an enforcement arm for the legal function. The industry needs to implement more structural changes in their compliance processes to make their risk and internal control frameworks more effective and sustainable over time.Those that throw out the old playbook and adapt to this new reality may enjoy a distinct competitive advantage in the foreseeable future. Banks will be able to deliver better service, reduce structural cost, and significantly de-risk their operations.

2. Samsung’s Massive Recall of Galaxy Note 7

Weeks after launching its well-received device, Galaxy Note 7, Samsung announced an unprecedented recall of the sold handsets.The issue was that there were problems due to battery issues that were leading to phones catching fire and sometimes even exploding. In January 2017, the company held a press conference to explain the technical issues that led to the malfunctions.


In September 2016, a mad rush to compete with the iPhone 7, led to Samsung’s oversight of the battery issues. Furthermore, the piece alleged that a toxic corporate culture was enabled by de facto leader Lee Jae-Yong’s loose grip on the company caused this mishap.

The Note 7 recall by Samsung wiped 98% off the profits of Samsung’s Mobile Division. Consequently, the company’s total profits came down by 30% to their lowest levels in the past 2 years. Samsung’s market value began to plummet as shares fell to their lowest level in nearly 2 months on Sept 12. Investors wiped 15.9 trillion Yen ($14.3 billion) off the South Korean firm’s market capitalization as a series of warnings from regulators and airlines around the world raised fears for the future of the device. (CNBC)


Note 7 was initially thought to be the best smartphone ever but came out as the worst ever phone made. Analysts say the recall could have a lasting impact on the company’s $211 billion brand image. As a result, it could derail the recovery in its smartphone market share against rivals like Apple. Some estimate that the firm might lose $5 billion worth of revenue after accounting for recall costs. (Fortune)

Lessons learnt from Samsung’s Note 7 Recall

  • Be wary of over-ambition
  • Speed does come at a price
  • Listen to the silent voices in the organization
  • Brand reputation can be easily lost
  • Make sure you fix it right the first time
  • Strike the right note with customers & stakeholders
  • Ensure that culture adapts to the complexity

Every company is just one bad decision or one ‘bad employee’ away from scandal, one scandal away from a salacious headline, and one headline away from a flood of lawsuits.” Finally, non-compliance can ruin corporate reputations, shatter financial performance, and destroy careers, families, and lives. With so much to lose, doesn’t compliance deserve our undivided attention?

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