1 WHEN THE REGULATOR COMES KNOCKING – 5 MYTHS © Copyright Ellen Bessner Ellen Bessner Tel:

© Copyright Ellen Bessner2 BOARD ASKS IN-HOUSE: WHAT TO DO?

INTRODUCTION: ARE YOU PREPARED? © Copyright Ellen Bessner 3 Where is highest risk? Risk changing? Compliance risk plan? Assess Risk/ Heat Map

INTRODUCTION: ARE YOU PREPARED? © Copyright Ellen Bessner 4 Reputational Criminal Civil Regulatory Internal controls/governance Potential Risks

INTRODUCTION: ARE YOU PREPARED? © Copyright Ellen Bessner 5 Privacy Employment Client Issues Regulatory Infractions Corruption of Foreign Public Officials Potential Risks

MYTH #1 : EARLY IDENTIFICATION OF ISSUE? PRACTICE OSTRICH PHENOMENON © Copyright Ellen Bessner 6

7 Assess Seriousness of Risk Know the RegulatorS Build Team/PlanDevelop Protocols BETTER OPTION: USE EARLY DETECTION

© Copyright Ellen Bessner8 Collection of Information Develop Contingency Plans and Possible Responses E & O; D & O Coverage [Understand Limits] BETTER…USE EARLY DETECTION

MYTH #2: “WE CAN JUST FIX THE PROBLEM” © Copyright Ellen Bessner9

BETTER THAN QUICK FIX… © Copyright Ellen Bessner10 CONVINCE BOARD TO CONSIDER LONG TERM SOLUTION Develop Plan for long term to be perceived as good corporate citizen Short terms stock pain for ultimate stock gain (survival of the company) Change problem into Opportunity (Maple Leaf Foods Michael McCain, won leadership/CEO prizes for his handling of Listeria crisis)

BETTER THAN QUICK FIX… © Copyright Ellen Bessner11 MAY NEED TO SPEND ON OUTSIDE EXPERTISE Forensics or independent accountants review books and calculate damagesLawyer to complement the internal knowledge and expertiseWho will liaise with regulatorsStrategize with PR team

MYTH #3: FIND A TARGET TO BLAME © Copyright Ellen Bessner12

BETTER… © Copyright Ellen Bessner13 Conduct thorough investigation and become informed (ex. Lead paint in toys – know your suppliers; Tylenol drug tampering causing death; what went wrong? Change packaging) Don’t make sloppy mistakes (wrong scapegoat) Can you enter into settlement with employee to go quietly and take blame with script? Can company prove this was the cause?

MYTH #4: PREMATURE ADMISSIONS © Copyright Ellen Bessner14

BETTER… © Copyright Ellen Bessner15 BREATH AND SAY NOTHING If surprised, keep them in meeting room until contact necessary counsel with specific industry experience Check warrant and other documents Do not be overly compliant- give them ONLY what they ask for (ensure legally entitled)

MYTH #5: DENY EVERYTHING! © Copyright Ellen Bessner16

BETTER… © Copyright Ellen Bessner17 DO NOT DENY OR ADMIT Do not compromise company’s position- destroy documents (Conrad Black/Panasonic-Executive 1 Year in Prison; Company $4.5M) Keep copy of what is given and get receipt for originals

BETTER… © Copyright Ellen Bessner18 DO NOT DENY OR ADMIT Do not alert third parties who might also be investigated Accompany investigator and take detailed notes

BETTER: HAVE DUCKS IN A ROW © Copyright Ellen Bessner19

CONCLUSION  Assess vulnerabilities – Risk Heat Map  Be prepared with PLAN and TEAM  Review/adjust plan and team  Respond quickly  Get ahead of the regulator (usually easy)  Continue to review and update policies – top down  Goal: Mitigate risks, especially reputational © Copyright Ellen Bessner20

MY PARTING NOTE:  Terry Flynn professor of crisis management at McMaster University: “… There are two courts that an organization operates within. One is the court of law and the other one is the court of public opinion and sometimes you might win it in the court of law but lose it in the court of public opinion and therefore, not have any customers at the end of the day to sell your products to.”  Ellen Bessner: “Wouldn’t you like to win in both – court of law and public opinion?” © Copyright Ellen Bessner21

THANK YOU © Copyright Ellen Bessner 22 Ellen Bessner Tel: