Too Small to Worry About Compliance?

In the Due Diligence phase of an acquisition not so long ago, the owner of the target company casually remarked, “We can’t afford to worry about compliance because we are too small.” He was probably surprised when the acquisition did not go through.

Is there a “too small” for organizations when it comes to regulatory compliance?

Every business and nonprofit has compliance challenges. They range from payroll tax remittance to local government permits to strings attached to their revenue. Some carry harsher penalties than others, but there are consequences if your organization is caught while not in compliance.

One aspect of managing risk is to determine the costs of failure and balance it with the long-term costs of prevention. If the cost of failure is very small and the cost of prevention is significant, many will choose to “self-ensure” and gamble that they will not have a failure. But be certain you accurately quantify the costs of failure. There may be hidden costs such as damage to reputation, injury to a contractual relationship or an increase in attention from other regulators.

For example, refusing to compensate employees for accrued vacation hours when they voluntarily leave your employment seems like a cost-savings tactic that motivates employees to stay with your organization. Yet if the state the employee resides in requires that you pay the accrued vacation hours upon separation, you face a combination of penalties, legal fees and time away from your core business operations on top of the amount you will eventually pay for the vacation time (plus interest in many states). If you are gambling with compliance, takes only one disgruntled employee to ruin your whole day.

Are there provisions in any of your contracts where you assured the other party that you are compliant with all labor laws? If so, in the scenario above, you may put that contract and future contracts in jeopardy. If the contracts are with a government agency, you may face even worse penalties for false statements in the contract. The cost savings now look far less valuable.
So are you “too small” to worry about compliance? Perhaps the better question is: “How can I become (or remain) compliant with a reasonable effort and expense?” I will explore that in later posts.

Credit Card Interest--Where's our "stimulus" plan?

Why aren’t we seeing some “stimulus” rates in our accounts? OK, we all know it is best to not carry ANY balance, but for some people, it is simply not realistic to see their debts all paid up by the end of this month. So they are charged interest for the loan and a portion of each payment goes to interest first, then toward the remaining balance.

With the Wall Street Journal Prime Rate now down to 3.25% and the LIBOR shown on BankRate.com at or about 0.51%--which are typically used by credit card lenders to set their interest rates--shouldn’t we see some relief in consumer credit card rates? After all, if consumers pay less in interest, some argue, they would be more inclined to carry a balance and even do some heavier charging, helping the overall economy, right?

But the opposite appears to be happening. Banks are raising rates and converting fixed rate cards to variable, higher rates. Ellen Cannon's post on the Plastic Rap blog has more about this unfortunate trend.

And what happened to all the zero percent offers? Is your mailbox getting lonely?

Funny that lenders were ever so eager to lure cash-poor borrowers to charge to the max when interest rates were higher. Give ‘em a rate of zero for six months, then sock it to them after the balance built up by raising the rate to 9%, 12%, even 18%. Where is the love now?

Remember the old excuse for high interest rates or rate increases if you were late on a payment? “It’s because of the heavy write-offs we have for those who fail to pay their bills.” Hmmm. And WHO selected such risky customers in the first place? WHO gave them teaser rates to port their large balances over from prior lenders? WHO continued to send unsolicited cards by the millions to people who already had heavy balances?

With all the hand-wringing over the economic rescue packages and clamoring about taxpayer money going to those less responsible than we, have we forgotten how innocent borrowers have been forced to subsidize the debts of those credit card lenders for decades? It isn’t the irresponsible borrowers we have subsidized that makes us angry: it is the lenders who insisted on making responsible borrowers pay for THEIR mistakes by factoring the write-offs into OUR interest rates. They want a system where there is no risk and all profit in their credit card units. So more people will file for bankruptcy to get out of their debts when things go badly for them rather than work out repayment plans directly.

If you want to see where your cards stack up against others, use the Bankrate comparison tool. But beware: it is good to pay your balances off, it is NOT good to then close those accounts to remove the tempation to use them again. Read more about that from the Credit Card Advisor.

More Details on C-DROMO concept

Here are more thoughts on the C-DROMO concept.

Imagine Galveston, Texas, being swamped with offers for help, food, equipment, etc. Would the Red Cross be able to handle it? The local police department? FEMA?

No. We need people who are prepared.

The inititial concept includes preparing people all over the U.S. with:
>Training for selected coordinators in each of five regions Regional Commanders (1 per region) – responsible for:
>>Recruiting Regional Coordinators
>>Overseeing the fulfillment of program objectives in their region
>>Management of resources allocated to their region
>>Strategic planning for the anticipated disasters in the region
>>Liaising with senior government and military leaders in the region to
>>>facilitate coordinated efforts in the event of a major disaster
>Regional Coordinators (1-3 per region) – responsible for:
>>Recruiting and training Local Resource Managers
>>Detailed planning and execution of mock disaster drills in the region
>>Inventory and assess resources, equipment and needs
>>Prepare communication, logistical and materiel management strategies for
>>>rapid, effective deployment if needed
>Local Resource Managers (1 per state in the region) – responsible for:
>>Creating and maintaining essential contact information for all local first
>>>responder organizations
>>Periodic reaffirmation with local government, first responder, and military
>>>officials of the plans of action in the event of a major disaster
>>Execution of local mock disaster drills to rehearse for smooth response to
>>>real events
>>Collection of essential supplies, equipment, tools and informational
>>>materials for volunteers and store appropriately until needed
>>Preparation of skills inventory lists in conjunction with first responder
>>>agencies for each general type of potential disaster in the area to provide a
>>>quick list that can be communicated to local media as a call for volunteers
>>>with special skills that would help the response effort succeed faster
>>Minimal paid staff for program administration
>>Equipment for logistics, communication and materiel management
>>Technical equipment
>>Technology
>>Communications
>>Emergency Power
>>Emergency fuel
>>Funding for rapid transportation of coordinators to the area of need and
>>>short-term food, equipment and shelter until additional supplies arrive

Problems at Facebook - Next!

This was posted on Newsday.com yesterday:

Computer security specialists warn that Facebook users havebeen hit with a series of data-stealing attacks in the past week as cyber crooks increasingly stalk social-networking Web sites.

Full article is here.

Process Improvement for Nonprofits – Part 1: “Know Thyself”

The benefits of business process improvement are not restricted to the for-profit world. Shaving small steps off common processes can recover more time to deliver services to more people and the effect of cutting paper, printing, storage or other expenses is something every nonprofit understands. Can you really afford to NOT pursue efficiency?

To begin with, what are BPM and BPI and why should managers of nonprofits and government agencies care? Here are some terms and links to definitions.

Business Process
BPM=Business Process Management
BPI=Business Process Improvement
BPR=Business Process Re-engineering

Next, what does a typical BPI project look like? Here is a general outline that my posts will follow.

1. Diagnosis/Assessment: “What is happening now?” “Exactly how do we do everything that we do?”
2. Analyze Workflow: “Is this the best way we can operate?” “Do we need to do any parts of our work better/cheaper/faster/with fewer people?”
3. Identify Options for Improvement: “Where can we work differently?”
4. Design new processes or steps: “What will work for our organization?”
5. Gather feedback: “Is this in line with the organization’s mission?” “Does it actually improve the way we work?”
6. Test the new workflow: “Does it work in the real world?”
7. Monitor the results: “Are we getting the results we sought?”
8. Diagnosis/Assessment: “If no improvement, why?” “If that worked, what else can we improve?”
9. Begin a renewed effort

Step one is to document the present processes. It is as simple as outlining in an “if-then-else” format like this:

1. Caseworker checks the “Waiting for Callback” message tray, and
>>>>A. If Caseworker sees items in the “Waiting for Callback” tray, then
>>>>>> a. If so, Caseworker determines whether any of the calls are of the type Caseworker can handle, then
>>>>>>>>i. If so, Caseworker calls the person who left the message;
>>>>>>>>ii. Else, Caseworker leaves the message for another person;
>>>>>> b. Else,
>>>> B. If none, then Caseworker moves to the next task or process ....

Each “if” requires at least an “else” to complete the step. Add “then” and “loop back” items where appropriate.

The process outline should contain the “actors,” “objects,” “choices,” “options,” and each probable outcome, broken down into specific steps. This is not a training manual that teaches the reader how to do the task, what to put into each tray or data field, etc. Those details are not included unless they impact the flow of work somewhere down the line.

It is essential to the rest of this analysis that the author of the outline involve others who can validate every step in the workflow. Whatever it takes, get an accurate validation by others who actually do the work. Make sure it is safe for these participants to be completely honest. Never assume work flows according to policy or congruent with training. Work is like water: it typically seeks in real life the path of least resistance. Without an accurate picture of how the work is truly done, other steps will become less and less accurate throughout the remainder of this process.

Consumer Mortgage Cram-down Update

From Bloomberg today:
Cram-Down Mortgage Bill Compromise Likely, Hoyer Says (read article here)

The compromise version of the bill so far contains these key provisions, according to the report:

1. Borrowers must make a good faith effort to seek a loan modification from the lender before they are eligible for the cram-down
2. Borrowers must certify that they have provided their income, expenses and debts to the lender
3. The collateral for the loan must be worth less than the amount owed
4. The unmodified loan must be unaffordable to the borrower

The key provision is that the bankruptcy judge will have the discretion to break through whatever is holding up an agreed solution and to make a reasonable modification that factors the interests of both parties. The existence of a strong-arm power like this will drive the parties to negotiate and also eliminate the situation where a mortgage servicer lacks the actual authority to modify the terms sufficiently to accomplish a result where the borrower avoids foreclosure.

This bill appears to deserve support across the board.

A "Do Not Call List" for Cell Phones?

As an update to the SPAM post earlier, here is something to clear the confusion about unwanted cell phone solicitations:

First, there is no such thing as a "Do Not Call" list for mobile numbers. Even if you register your mobile number on the www.DoNotCall.gov site, it does not have any effect. There is no plan under consideration to create one, either.

Secondly, the reason no such list is needed is because it is already illegal for telemarketers to call your mobile number. (Text messages from your carrier and its partners are OK, however.)

Here is a good blog site for consumer information such as the above: it is a blog by none other than Consumer Reports. Their post on this topic is here.

C-DROMO as part of NRF

I was reviewing the FEMA National Response Framework information. Seems to me like the C-DROMO program discussed below would fit nicely there.

From the FEMA site: "The National Response Framework presents the guiding principles that enable all response partners to prepare for and provide a unified national response to disasters and emergencies – from the smallest incident to the largest catastrophe. The Framework establishes a comprehensive, national, all-hazards approach to domestic incident response."

[Of course, there's the whole debate about whether FEMA should be taken out of Homeland Security, as noted in a post on the Washington Post site last year....one argument against, from Government Executive.]