Sparked by Walmart’s recent scandal in Mexico, CFOs are anxious to learn how the company should have dealt with the situation. What exactly is the difference between a “facilitation fee” and a bribe? How can an organization stay legal in foreign markets where legislation is—at best—ambiguous? What should organizations do to prepare for the next “black swan” event? Who ultimately is held responsible for accounting and reporting errors abroad?
Perhaps because of the answer to this last question, CFOs, now more than ever before, are paying more attention to these issues. Regulators are coming after the top executives who are in charge of managing risk, namely the CEO and CFO.
“So if my company’s branch office in China is caught handing out bribes, and I honestly have no idea that’s going on, I’m the one who’s going to be prosecuted?” asked one CFO during a conference workshop.
You betcha.
As CEO or CFO, you are responsible for knowing what is going on in your organization, regardless of international borders. You are also personally responsible for listening to your whistleblowers and taking action against known illegal activities. Creating a transparent finance function facilitates internal and external audits, catches discrepancies, forces action to remedy problems before they can ever affect shareholder value (as how Walmart’s missteps turned into a scandal), and creates an optimized organization that can easily adjust to changing local regulations. In other words, money needs to be invested in improving audit visibility, especially when entering a foreign market.