It’s budgeting season for many companies, and word on the street is that things aren’t looking good for compliance teams. It can be summed up by an email I received from a compliance head at a Fortune 500: “We are being asked to cut back this year.”
It’s been a difficult few years. Pandemic, wild stock volatility, inflation, shadows of a recession. All of these things take a toll on corporate budgets.
On the other hand, some corporate profits have never been higher; up nearly 10 percent year-on-year at Microsoft, and a similar upside story at Chevron, Walmart, McKesson, and others.
So, what’s driving the cuts to compliance budgets?
Well, enforcement is way, way down.
In 2020, total FCPA settlements topped $6.4 billion. In 2021, that fell to a comparatively tiny $282 million.
Enforcement totals for 2022 bounced back a bit to $1.5 billion, and so far in 2023 we’ve seen settlements of just $300 million.
Enforcement actions this year have also been interestingly small. The largest (not counting Ericsson’s DPA breach) is $62 million paid by Koninklijke Philips. Three of the six settlements this year have been under $10 million. Gartner’s $2.5 million resolution last month was the smallest corporate FCPA settlement since 2018.
Is compliance slowly falling out of executive talking points without the headline-grabbing FCPA enforcement actions?
It certainly seems to be the case that it is harder to justify big compliance budgets than it used to be.
Alternatively, this could be a needed market correction. Compliance budgets swelled in headcount and dollars after the major compliance scandals of the late-2010s and a string of FCPA mega-settlements.
Who knows the actual reason, but if companies begin to feel comfortable cutting compliance budgets, the logical end isn’t good: less compliance and more corruption.
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