Recently, as part of Venminder’s Thought Leadership interview series, I had the opportunity to speak with Michael Donnella, Corporate Compliance Officer at Murphy Oil Corporation, to hear his thoughts and perspectives on important third party risk topics. In this series, we speak with the industry’s sought-after thought leaders for their perspective and advice on third parties, mitigating risk, best practices, trends and more.
Before we dive in, let me share a little more about Michael. Prior to joining Murphy Oil Corporation in 2012, he served as Vice President, Chief Compliance Officer and Assistant General Counsel of Wyeth Pharmaceuticals, now known as Pfizer. He also served as chief counsel in several Wyeth’s global divisions in his 15-year tenure. Prior to Wyeth, Michael spent several years with AT&T, with assignments including state and federal regulatory, international commercial and trade policy counseling. He began practicing law with Troutman, Sanders in Atlanta.
Michael shared some great insight during our discussion. During our time together we covered:
- Third party risk best practices and struggles
- Helpful policy tips
- Senior management and board involvement
- And much more…
Creating a Culture of Compliance: It’s Key but a Struggle
I wanted to continue a conversation Michael and I began during a panel discussion earlier this year. I asked Michael, “What does it mean to have a culture of compliance in third party risk management?” He shared some great perspective. First, when thinking about third party risk, you think about the infrastructure. The infrastructure is the third party risk technology, training materials, policies and procedures.
From there, as you expand further, you consider the second element which is culture. In Michael’s opinion, third party risk culture is equally as important as infrastructure – maybe even more important. It would be great if everyone followed the policies in place; however, it’s not always feasible. Some will and do stray. Michael shared that a culture of compliance is setting expectations of one another, encouraging ethical conduct and behaving accordingly. It’s what is happening at the organization; it’s not what is necessarily in the infrastructure.
However, with that said, Michael does feel a culture of compliance is one of the bigger struggles for many folks in third party risk. According to Michael, here are a couple of reasons why:
- Corruption is a risk – Corruption is a big reality in many industries, and organizations need to recognize that and learn how to properly address it. Many aren’t prepared which leads to inconsistencies across the organization.
- Failure to take ownership – Many who have been in the industry for a quite a while tend to push blame on others for a third party’s negligent actions. They feel that they can’t control these vendors, which is a huge misconception as you can’t outsource the responsibility. This leads to even more inconsistencies.
While there are clearly some struggles presented, Michael shared that he thinks organizations are improving. Organizations are looking to each other, sharing notes, comparing and really adapting by learning the things that do and don’t work in third party risk infrastructure and culture.
Tailoring Policies: It’s Not One-Size-Fits-All
Remember, third party risk policies are important. Michael shared some policy tips that should help as you tailor them to your organization:
- Understand third party risk is prevalent even at even your own organization
- Understand all the risks posed by third parties and the tools you have available to help mitigate those risks
- Remind your third parties that every service or product they provide to your organization should be done so in accordance with the law, governing regulations, etc.
Senior Management and the Board: Do They Pay Enough Attention?
Michael shared that there are so many scenarios that cause you to pause and wonder if senior managers and the board are involved enough. He shares many great examples, from Wells Fargo executives constantly in the media in a negative light to Walmart and the corruption issues in Mexico and India. It seems very often that there are some senior management teams and board members that may not be doing quite enough or taking third party risk as seriously as they should.
Per Michael, “I think the challenge is that the board and the senior management are very busy, they're very time constrained, they're under pressure.”
He goes on to make a few more valuable points regarding senior management and board involvement. He said it makes you have to question what others are doing like the compliance teams, general counsel, etc. He feels as a compliance on control professional, it’s really your job to utilize your tools and ensure that you know everything that you need to know. With that, it’s even more important that a compliance or control professional knows how to effectively engage and quickly get critical messages across to the board. This should help with their involvement.
Third Party Risk Is Always Evolving
Michael concluded our discussion with this, “I say this all the time, and again, the infrastructure and the culture are both important, but what we are dealing with here in third party risk management, compliance, ethics and integrity is human endeavors, and so don't forget that human beings are complex organisms and they have to be treated carefully.”
Excellent perspective. On behalf of myself and Venminder, I’d like to thank Michael for joining me in this interview. To listen to the full discussion, you can check it out here.
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