International Commerce

• If you woke up on a Sunday morning only to read your “company’s name” and the word “fraud” in the same headline… what impact would this have on your firm’s reputation?
• Would shareholders sue?
• What impact would a rogue executive or trader have on corporate earnings?
• On your career?

Moral Hazard is the risk that employees of your firm intentionally behave inappropriately. The Moral Hazard “Wall of Infamy” includes companies such as Enron, WorldCom, HealthSouth, Barings Bank, Sumitomo, Orange County and others. Hundreds of $ millions and many thousands of hours have been invested to mitigate such scandals, but obviously to an insufficient extent.

Why?

In large part, because the majority of the resources committed to mitigate such events are being focused on the wrong areas. They focus mostly on the “hard” side of risk controls (including risk oversight committees, risk measures and reports, risk limits and audits) while nearly ignoring the “soft” behavioral side which includes skills, integrity, incentives, cultures and values. Unfortunately, history has clearly demonstrated that intentional bad behavior – squarely on the “soft” side – is where most fraud takes place.

Bad news:

Moral Hazard events cannot be prevented in an absolute sense. Further, many companies have unwittingly built-in conflicts between departments/divisions which contribute to and in some cases literally invite acts of Moral Hazard.

Good news:

They can be effectively influenced and managed… if you know what to do. The 80/20 rule seems to hold sway regarding rogue behavior – much of it can be mitigated at relatively little cost to your firm.

International Commerce will perform a “Moral Hazard Risk Assessment” on your firm’s current practices, policies and procedures, compensation, oversight, etc. Our deliverable will clearly illustrate:

• Where your firm is vulnerable to being ripped off and how,
• Where self-inflicted conflicts within and between departments/divisions exist,
• A menu of solutions to any findings in a “bang for the buck” context. This allows you to make a more informed decision as to what steps and costs are appropriate for your firm’s objectives.

These services offer significant value if:

• Your firm’s activity includes stock/commodity trading business where compensation is tied to
  performance.
• Commodity/Equity Trading
• In the event of a shareholder lawsuit; a company that takes preventative steps against rogue
  employees can use it to deflect shareholder ire away from the company itself and towards the
  offending employee.

For more information contact Dunham Cobb today; This e-mail address is being protected from spambots. You need JavaScript enabled to view it or call 561-818-5518.