In part 5 of Jay Rosen’s series on corporate monitorships, he discusses the always controversial topic of monitorship expenses, along with the various factors that play into overall cost.
In any post-resolution monitorship, the monitor is most likely coming in at the end of a long process. If it was an FCPA enforcement action, it could have been a years-long process with a lengthy investigation, coupled with an extensive remediation and then a long negotiation with the government over the final penalty. Yet there is an approach that a company can use to help the final leg of this process be more palatable.
The Scope of the Monitorship
This process can be broken down into three key areas. The first is the scope of the monitorship.
One must understand the settlement documents so that they can fully appreciate the scope of the monitor’s remit and what the government expects from the monitor.
Some resolutions can have a narrow focus, with a finite number of records or other documents to review. With such information, the company can work to scope out a range of what their costs might be. Conversely, the settlement documents can literally be wide-open, which obviously will have a dramatic impact on potential costs and even estimating.
The Frequency of the Engagement
The next factor to consider is frequency, by which I mean how often the monitor is engaging in monitorship activities for the company – daily? weekly? quarterly?
The frequency of monitoring will have a significant impact on your overall monitorship costs.
Another factor to consider is duration. Tied to the question of frequency is the length of the monitorship. How long the monitorship will last – one year, two years, three years or even five years – is a critical element.
Experience of the Monitor
The final factor (and often a key differentiator) is the monitor’s relevant experience. As we explored previously, one really needs to have a very direct conversation with monitor candidates to determine if they have the requisite experience and temperament to work with other individuals or teams of individuals.
Does the monitor understand their role, as prescribed by the four corners of the settlement document(s)? Or are they going to reinvent the wheel for each new part of the monitorship?
If they take this approach as they are going along, this is will surely add to the cost of the monetization, so that’s a factor that companies would be wise to consider.
…Another important factor on potential costs is they are driven by not only the scope of the monitorship, but also – and this is key – the efficiency and experience of the monitor.
Cost Control and the Monitor’s Workplan
A key document for cost control can be the monitor’s workplan, which outlines the monitor’s anticipated services. This gives the monitor, the company and the government a set of expectations for the tasks to be accomplished. Even though it may turn out to be a preliminary document, it does help to provide a level of certainty and a framework for moving forward.
It’s equally important for the monitor to understand they do not have to look at everything during the monitorship.
You can randomly sample and drill down to test if you need to do so. A monitor does not have to interview all persons in a high-risk location, but can select certain employees for a focus group and then perform a round of interviews if required. The workplan and its execution can be a powerful tool to help not only estimate the total cost, but also keep expenses down.
In case you missed the earlier installments of this ongoing series, please see the links below.