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Walmart’s Compliance Shift

walmartCompliance Week’s Matt Kelly recently interviewed Walmart’s Chief Compliance Officer Jay Jorgensen and wrote a two-part piece  on Walmart’s recent compliance transitions. It’s been nearly three years since Walmart made headlines due to allegations that its Mexican subsidiary violated the Foreign Corrupt Practices Act (FCPA) by paying more than $24 million in bribes to Mexican officials. The details of the investigation continue to unfold, but over the past couple years Walmart has drastically shifted its focus toward compliance across all of its units on an international level.

As a result of this investigation, Walmart has since embarked on a comprehensive compliance reform initiative and the retail giant has spent a total of $439 million on investigating these allegations and enhancing the company’s compliance practices.

Compliance Week points out that a contributing factor to the investigation into Walmart can be traced back to inconsistencies in compliance objectives across Walmart’s international units, which were located in more than a dozen countries. The article states that some of these “locally focused compliance operations, subordinate to the wants of local business units, were what got Walmart into trouble in the first place.”

Walmart addressed this by making compliance its own department, which had traditionally been a branch within legal. Walmart’s expectation is that this will allow a more direct way of communication between the compliance officials and the C-suite. Jorgensen was initially appointed as the lead in this transition, where he began by addressing overall compliance goals and translating those into targets for each of the countries in which Walmart conducts business. Units across the globe are then given incentives for meeting these compliance targets on an annual basis.

Jorgensen and his team have also replaced Walmart’s old standards and implemented 14 main responsibilities of the new compliance department, including anti-corruption, product safety, responsible sourcing, privacy and anti-money-laundering, among others. This has meant stepping up compliance training, implementing new IT systems and creating audit committees to track the company’s global compliance.

A compliance overhaul for a company of any size would likely prove expensive, but with approximately 2.2 million employees worldwide, Walmart’s transition to comprehensive compliance was quite costly. Charles Holley, Walmart’s chief financial officer, expects that the FCPA-related costs alone will range from $200-240 million for the company in fiscal year 2015.

The example being set by Walmart should serve as a message to companies of all kinds that addressing compliance standards is helpful in order to help avoid lengthy audits and damaging penalties. Top executives within organizations should consider prioritizing compliance and should realize that Walmart’s costly missteps could potentially happen to any company if the appropriate precautions are not taken.

 

 


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