Trade Compliance

GHY discusses changes to international trade regulations and explores cutting-edge compliance strategies.

Making the 5A Method Work

Posted August 10, 2016


The following real-world examples illustrate how internationally active companies of varying sizes have been empowered by their boards to successfully put “best practice” global trade compliance and risk management strategies to work.

Large Corporation

A privately-held multinational corporation based in the United States is involved in trading, purchasing and distributing grain and other agricultural commodities in addition to trading in energy, steel and transport; the manufacture of livestock and feed; and producing food ingredients used in processed foods and industrial applications.

Trade compliance in the organization is handled centrally by a global trade compliance officer, under the auspices of a global CFO reporting to the worldwide president and COO, who oversees a multinational team of management professionals. Import, export, and inter-company trade is closely monitored and reported to corporate HQ by domestic compliance specialists in each country. Communication takes place between global members of the compliance team on an ongoing basis, punctuated by in-person meetings at regularly scheduled intervals. Potential compliance risks are identified and analyzed in detail prior to moving ahead with critical decisions. Global trade compliance is regarded by the organization as a critical component of due diligence, commercial success/profitability, and brand reputation.

Mid-Sized International Companies

The president and executive team of this North American distributor of specialty chemicals and allied products has appointed a dedicated manager to oversee all compliance-related aspects of the company’s global trade activity throughout the organization’s supply chain – from point of origin with numerous manufacturing partners around the world to the secure delivery of products to its customers. Key risk elements at all stages of the process are continuously tracked and reported on to executive management with a focus on strict compliance with all regulatory impacts, which are of critical importance given the frequently hazardous nature of the commodities involved. Compliance is viewed by the organization as being more than an obligatory duty, but as absolutely essential to the protection its brand’s most valuable strategic assets – reliability and reputation.

Small -Medium Enterprise

A Canadian company with worldwide sales specializing in the manufacture of insulated outerwear. Garments are produced in the company’s own factories in Canada and Southeast Asia. The company president is directly involved in all global sourcing, manufacturing, and sales activities. He is also primarily responsible for managing overall financial risks of the organization, supported by close-knit operations team and an in-house “champion” with trade compliance expertise. All regulatory impacts are tracked and monitored with a direct link to the president concerning any cost or financial risk implications. Although the team is relatively mall and operates on a somewhat informal basis, it is nonetheless highly effective at achieving its goal of rigorously control both risk and cost in an intensely competitive market.

Summary

As we discovered when researching a previous white paper about “best practices” in trade compliance, corporate leadership plays a key role in driving the successful implementation of compliance-related priorities throughout the organization. This reflects a sentiment shared by many experts in the field of corporate governance that there should be a strong “tone at the top” from the board and senior management emphasizing that non-compliance will not be tolerated.

While senior executives and boards are not necessarily expected to be involved in the detailed implementation or day-to-day operational administration of compliance functions within their organization’s they nevertheless have ultimate responsibility for the oversight function in this regard.

In the course of protecting the shareholders’ best long-term interests, ensuring overall enterprise performance, and safeguarding the organization’s brand integrity, the board must therefore constantly assess possible risks, review options for their mitigation, and ensure adequate processes are in place for maintaining regulatory compliance.
 

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