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Managing Risk from the Top to Bottom 
Arrows designed by André Luiz Gollo from the Noun Project 
http://thenounproject.com/term/arrows/32495/
How to Safeguard Against 
Misconduct 
From C-Suite Level to Regular 
Employees – and Using HR as a 
Gatekeeper
Presented at American Conference Institute’s 
3rd Asia Pacific Summit on Anti-Corruption, 
Compliance and Risk 
Management 
December 03-04, 2014, Hilton Singapore
Eric Pesik 
Associate General Counsel and Compliance Officer 
Seagate Technology International 
Bradley Klein 
Partner 
Skadden, Arps, Slate, Meagher & Flom 
Thiru Sethuraman 
Director, Ethics and Compliance 
Cummins Distribution Business
Defining Your Legal Universe 
Telescope designed by Claudiu Sergiu Danaila from the Noun Project 
http://thenounproject.com/term/telescope/9777/
Legal Universe 
• Local vs Home 
Jurisdiction 
• Collateral Laws and 
Related Issues 
• Territorial vs Personal 
Jurisdiction 
Judge by Luis http://thenoun Pprraodjeoc ftr.coomm T/theer mN/ojuudng Per/o3j9ec5t3 /
Risk Mitigation Actions From the Top 
Hierarchy designed by Murali Krishna from the Noun Project 
http://thenounproject.com/term/hierarchy/31709/
86% of corporate fraud is 
known or perpetrated by senor 
executives 
Data: Corporate Executive Board, 2006 
86%
If you wanted to design an 
incubator for generating 
misconduct, it would look a lot like 
the C-Suite 
Quote: RAND Symposium 
Culture, Compliance and the C-Suite 
Image:: Team designed by Wilson Joseph from the Noun Project 
http://thenounproject.com/term/team/35432/
Median Loss (USD) to Fraud 
by Position of Perpetrator 
$130,000 
$75,000 
$500,000 
Executive/Owner 
Manager 
Employee 
Data: 2014 Report to the Nations on Occupational Fraud and Abuse. Copyright 2014 by the Association of Certified Fraud Examiners, Inc.
CEOs are prone to viewing 
the company’s success as indistinguishable 
from their 
own. 
Quote: Scott Killingswroth, Partner Bryan Cave LLP 
“C” is for Crucible 
Superhero designed by Juan Pablo Bravo from the Noun Project 
http://thenounproject.com/term/superhero/23556/
Year -3 Year -2 Year -1 Year 0 Year +1 Year +2 Year +3 
0.00% 
-0.50% 
-0.10% 
-0.20% 
-0.40% 
-1.20% 
-0.60% 
Net Profit Margin 
Companies that bribe have poorer net profit 
margin (net income divided by sales revenue) 
Data: Cheung, Stephen Yan-Leung, Rau, Raghavendra and Stouraitis, Aris, 
How Much do Firms Pay as Bribes and What Benefits do They Get? Evidence from Corruption Cases Worldwide (March 30, 2012)
Year -3 Year -2 Year -1 Year 0 Year +1 Year +2 Year +3 
2.70% 
5.10% 
3.20% 
0.90% 
2.30% 
1.40% 
Sales Growth 
Companies that bribe have greater sales growth 
compared to control firms 
Data: Cheung, Stephen Yan-Leung, Rau, Raghavendra and Stouraitis, Aris, 
How Much do Firms Pay as Bribes and What Benefits do They Get? Evidence from Corruption Cases Worldwide (March 30, 2012)
Year -3 Year -2 Year -1 Year 0 Year +1 Year +2 Year +3 
-2.90% 
0.50% 
1.50% 1.60% 
0.30% 
-4.60% 
-6.80% 
Cumulative Abnormal Returns 
Companies that bribe have poorer cumulative 
abnormal returns (difference between the sum of the 
monthly returns for bribing firms versus control firms) 
Data: Cheung, Stephen Yan-Leung, Rau, Raghavendra and Stouraitis, Aris, 
How Much do Firms Pay as Bribes and What Benefits do They Get? Evidence from Corruption Cases Worldwide (March 30, 2012)
From the Top 
• Tone From the Top 
• Risk Management 
Oversight 
• Establishing Internal 
Controls 
• Guiding Middle 
Management
Risk Mitigation Actions From the Middle 
Image:: Group designed by Tonielle Krisansk, public domain 
http://thenounproject.com/term/group/7771/
From the Middle 
• Tone From the Middle 
• Anticipate and Recognize 
Ethical Dilemmas 
• Communicate Ethical 
Values 
• Report to Top
Risk Mitigation Actions At the Frontline 
Worker designed by Kris Khoury from the Noun Project 
http://thenounproject.com/term/worker/2156/
Occupational Fraud Frequency 
by Position of Perpetrator 
42.0% 
18.6% 
26.2% 
Executive/Owner 
Manager 
Employee 
Data: 2014 Report to the Nations on Occupational Fraud and Abuse. Copyright 2014 by the Association of Certified Fraud Examiners, Inc.
Fraud Triangle 
Pressure 
Donald R. Cressey, Other People's Money (Montclair: Patterson Smith, 1973) 
Image:: Deep-Web Designed by Matt Brooks, Public Domain, http://thenounproject.com/term/deep-web/62765/
Top Behavioral Red Flags 
Divorce/ 
Family Problems 
“Wheeler-Dealer” 
Attitude 
Living 
Beyond 
Means 
Financial 
Difficulties 
Control Issues, 
Unwillingness 
to Share Duties 
Unusually Close 
Association with 
Vendor/Customer 
Employee 
“Wheeler-Dealer” 
Attitude 
Control Issues, 
Unwillingness 
to Share Duties 
Executive Manager 
Data: 2014 Report to the Nations on Occupational Fraud and Abuse. Copyright 2014 by the Association of Certified Fraud Examiners, Inc.
When the big people 
get in trouble, the little people 
get ethics training. 
Quote: RAND Symposium 
Culture, Compliance and the C-Suite 
Image:: Education designed by Chris Matthews 
http://thenounproject.com/term/education/3012/
At the Frontline 
• Implement Tone From 
the Top and Middle 
• Anticipate and Recognize 
Ethical Dilemmas 
• Internalize Ethical Values 
• Whistleblower Hotlines
Gatekeeper: Human Resources 
Office designed by Luis Prado from the Noun Project 
http://thenounproject.com/term/office/26565/
Human Resources 
• New Hires 
• Align Performance and 
Compensation 
• Structural Alignment 
• HR Policies 
• Training 
• Communication
Case Study JP Morgan 
Friend designed by Megan Sheehan from the Noun Project 
http://thenounproject.com/term/friend/6808/
Case Study: GlaxoSmithKline 
Pill designed by Diego Naive from the Noun Project 
http://thenounproject.com/term/pill/16599/
Key Areas of Focus for 
Compliance 
Zoom-In designed by Garrett Knoll from the Noun Project 
http://thenounproject.com/term/zoom-in/28614/
Focus for 
Compliance 
• Policies 
• Education 
• Enforcement 
• Remediation 
Diversity designed by Luis Prado from the Noun Project 
http://thenounproject.com/term/diversity/52927
Risk Management Model (ISO 31000, modified) 
1. Mandate and 
Commitment 
4. Communicate and 
Consult 
2. Risk Assessment 
Risk Identification 
Risk Analysis 
Risk Evaluation 
6. Tools and 
Resources 
5. Monitor 
and Review 
3. Risk Treatment
Issues and Control Points 
Hand designed by Luis Prado from the Noun Project 
http://thenounproject.com/term/hand/30823/
Issues and 
Control Points 
• Using Third Parties 
• Expense Reimbursement 
• Events and Hospitality 
• Other Key Areas
Questions? 
Hand designed by Luis Prado from the Noun Project 
http://thenounproject.com/term/hand/30823/
Please like and 
share! 
View other presentations: 
http://www.slideshare.net/ericpesik/presentations 
Like designed by Marwa Boukarim from the Noun Project 
http://thenounproject.com/term/like/1297/
Additional Resources 
• Ethics Resource Center 
www.ethics.org 
• International Business Ethics Institute 
www.business-ethics.org 
• Ethics Web Resources 
http://www.ethicsweb.ca/esources/index.html 
• ISO 31000 standard 
http://www.iso.org/iso/home/standards/iso31000.htm 
• Association of Certified Fraud Examiners 
http://www.acfe.com/ 
• RAND Corporation: Culture, Compliance, and the C-Suite 
http://www.rand.org/pubs/conf_proceedings/CF316.html 
• How Much do Firms Pay as Bribes and What Benefits do They 
Get? Evidence from Corruption Cases Worldwide 
http://ssrn.com/abstract=1772246 
• Bribes and Firm Value - Evidence from Anti-Bribery Regulation 
http://ssrn.com/abstract=2179437

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Managing risk from top to bottom by @ericpesik

  • 1. Managing Risk from the Top to Bottom Arrows designed by André Luiz Gollo from the Noun Project http://thenounproject.com/term/arrows/32495/
  • 2. How to Safeguard Against Misconduct From C-Suite Level to Regular Employees – and Using HR as a Gatekeeper
  • 3. Presented at American Conference Institute’s 3rd Asia Pacific Summit on Anti-Corruption, Compliance and Risk Management December 03-04, 2014, Hilton Singapore
  • 4. Eric Pesik Associate General Counsel and Compliance Officer Seagate Technology International Bradley Klein Partner Skadden, Arps, Slate, Meagher & Flom Thiru Sethuraman Director, Ethics and Compliance Cummins Distribution Business
  • 5. Defining Your Legal Universe Telescope designed by Claudiu Sergiu Danaila from the Noun Project http://thenounproject.com/term/telescope/9777/
  • 6. Legal Universe • Local vs Home Jurisdiction • Collateral Laws and Related Issues • Territorial vs Personal Jurisdiction Judge by Luis http://thenoun Pprraodjeoc ftr.coomm T/theer mN/ojuudng Per/o3j9ec5t3 /
  • 7. Risk Mitigation Actions From the Top Hierarchy designed by Murali Krishna from the Noun Project http://thenounproject.com/term/hierarchy/31709/
  • 8. 86% of corporate fraud is known or perpetrated by senor executives Data: Corporate Executive Board, 2006 86%
  • 9. If you wanted to design an incubator for generating misconduct, it would look a lot like the C-Suite Quote: RAND Symposium Culture, Compliance and the C-Suite Image:: Team designed by Wilson Joseph from the Noun Project http://thenounproject.com/term/team/35432/
  • 10. Median Loss (USD) to Fraud by Position of Perpetrator $130,000 $75,000 $500,000 Executive/Owner Manager Employee Data: 2014 Report to the Nations on Occupational Fraud and Abuse. Copyright 2014 by the Association of Certified Fraud Examiners, Inc.
  • 11. CEOs are prone to viewing the company’s success as indistinguishable from their own. Quote: Scott Killingswroth, Partner Bryan Cave LLP “C” is for Crucible Superhero designed by Juan Pablo Bravo from the Noun Project http://thenounproject.com/term/superhero/23556/
  • 12. Year -3 Year -2 Year -1 Year 0 Year +1 Year +2 Year +3 0.00% -0.50% -0.10% -0.20% -0.40% -1.20% -0.60% Net Profit Margin Companies that bribe have poorer net profit margin (net income divided by sales revenue) Data: Cheung, Stephen Yan-Leung, Rau, Raghavendra and Stouraitis, Aris, How Much do Firms Pay as Bribes and What Benefits do They Get? Evidence from Corruption Cases Worldwide (March 30, 2012)
  • 13. Year -3 Year -2 Year -1 Year 0 Year +1 Year +2 Year +3 2.70% 5.10% 3.20% 0.90% 2.30% 1.40% Sales Growth Companies that bribe have greater sales growth compared to control firms Data: Cheung, Stephen Yan-Leung, Rau, Raghavendra and Stouraitis, Aris, How Much do Firms Pay as Bribes and What Benefits do They Get? Evidence from Corruption Cases Worldwide (March 30, 2012)
  • 14. Year -3 Year -2 Year -1 Year 0 Year +1 Year +2 Year +3 -2.90% 0.50% 1.50% 1.60% 0.30% -4.60% -6.80% Cumulative Abnormal Returns Companies that bribe have poorer cumulative abnormal returns (difference between the sum of the monthly returns for bribing firms versus control firms) Data: Cheung, Stephen Yan-Leung, Rau, Raghavendra and Stouraitis, Aris, How Much do Firms Pay as Bribes and What Benefits do They Get? Evidence from Corruption Cases Worldwide (March 30, 2012)
  • 15. From the Top • Tone From the Top • Risk Management Oversight • Establishing Internal Controls • Guiding Middle Management
  • 16. Risk Mitigation Actions From the Middle Image:: Group designed by Tonielle Krisansk, public domain http://thenounproject.com/term/group/7771/
  • 17. From the Middle • Tone From the Middle • Anticipate and Recognize Ethical Dilemmas • Communicate Ethical Values • Report to Top
  • 18. Risk Mitigation Actions At the Frontline Worker designed by Kris Khoury from the Noun Project http://thenounproject.com/term/worker/2156/
  • 19. Occupational Fraud Frequency by Position of Perpetrator 42.0% 18.6% 26.2% Executive/Owner Manager Employee Data: 2014 Report to the Nations on Occupational Fraud and Abuse. Copyright 2014 by the Association of Certified Fraud Examiners, Inc.
  • 20. Fraud Triangle Pressure Donald R. Cressey, Other People's Money (Montclair: Patterson Smith, 1973) Image:: Deep-Web Designed by Matt Brooks, Public Domain, http://thenounproject.com/term/deep-web/62765/
  • 21. Top Behavioral Red Flags Divorce/ Family Problems “Wheeler-Dealer” Attitude Living Beyond Means Financial Difficulties Control Issues, Unwillingness to Share Duties Unusually Close Association with Vendor/Customer Employee “Wheeler-Dealer” Attitude Control Issues, Unwillingness to Share Duties Executive Manager Data: 2014 Report to the Nations on Occupational Fraud and Abuse. Copyright 2014 by the Association of Certified Fraud Examiners, Inc.
  • 22. When the big people get in trouble, the little people get ethics training. Quote: RAND Symposium Culture, Compliance and the C-Suite Image:: Education designed by Chris Matthews http://thenounproject.com/term/education/3012/
  • 23. At the Frontline • Implement Tone From the Top and Middle • Anticipate and Recognize Ethical Dilemmas • Internalize Ethical Values • Whistleblower Hotlines
  • 24. Gatekeeper: Human Resources Office designed by Luis Prado from the Noun Project http://thenounproject.com/term/office/26565/
  • 25. Human Resources • New Hires • Align Performance and Compensation • Structural Alignment • HR Policies • Training • Communication
  • 26. Case Study JP Morgan Friend designed by Megan Sheehan from the Noun Project http://thenounproject.com/term/friend/6808/
  • 27. Case Study: GlaxoSmithKline Pill designed by Diego Naive from the Noun Project http://thenounproject.com/term/pill/16599/
  • 28. Key Areas of Focus for Compliance Zoom-In designed by Garrett Knoll from the Noun Project http://thenounproject.com/term/zoom-in/28614/
  • 29. Focus for Compliance • Policies • Education • Enforcement • Remediation Diversity designed by Luis Prado from the Noun Project http://thenounproject.com/term/diversity/52927
  • 30. Risk Management Model (ISO 31000, modified) 1. Mandate and Commitment 4. Communicate and Consult 2. Risk Assessment Risk Identification Risk Analysis Risk Evaluation 6. Tools and Resources 5. Monitor and Review 3. Risk Treatment
  • 31. Issues and Control Points Hand designed by Luis Prado from the Noun Project http://thenounproject.com/term/hand/30823/
  • 32. Issues and Control Points • Using Third Parties • Expense Reimbursement • Events and Hospitality • Other Key Areas
  • 33. Questions? Hand designed by Luis Prado from the Noun Project http://thenounproject.com/term/hand/30823/
  • 34. Please like and share! View other presentations: http://www.slideshare.net/ericpesik/presentations Like designed by Marwa Boukarim from the Noun Project http://thenounproject.com/term/like/1297/
  • 35. Additional Resources • Ethics Resource Center www.ethics.org • International Business Ethics Institute www.business-ethics.org • Ethics Web Resources http://www.ethicsweb.ca/esources/index.html • ISO 31000 standard http://www.iso.org/iso/home/standards/iso31000.htm • Association of Certified Fraud Examiners http://www.acfe.com/ • RAND Corporation: Culture, Compliance, and the C-Suite http://www.rand.org/pubs/conf_proceedings/CF316.html • How Much do Firms Pay as Bribes and What Benefits do They Get? Evidence from Corruption Cases Worldwide http://ssrn.com/abstract=1772246 • Bribes and Firm Value - Evidence from Anti-Bribery Regulation http://ssrn.com/abstract=2179437