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Compliance Risk Part 1

Terms in this set (189)

Risk-
Probability or threat of damage, injury, liability or loss
Risk Determinants-
Likelihood and Severity
RISK TYPES
A. Market Risk
Relates to changes of pricing and value of assets and liabilities under different market conditions
B.
Credit Risk
Relates to ability to borrow and payback or, for financial services, who to lend to and the ability to payback
C.
Liquidity Risk
Relates to ability to meet financial obligations under different economic conditions, or financial services, also the effect of the liquidity of products offered
D.
Operational Risk
Relates to running the business from end-to-end through people, process and systems to drive operational excellence and minimize losses
E.
Strategic Risk
Relates to the organization's purpose and strategy to achieve that purpose
F.
Reputational Risk
Relates to the organization's reputation for trust and integrity
G.
Compliance Risk
Relates to how close the organization follows the applicable laws, rules and regulations
Understanding Types of Risk
A. Compliance Risk-
Relates to how close the organization follows the applicable laws, rules and regulations.
Pharmaceutical Case Study
The Pfizer Case Study-
A. Primary Type of Action: Off-Label Marketing Case
B. Drug at Issue: Bextra - an anti-inflammatory drug approved in 2001 for treatment of arthritis and menstrual cramps and was no stronger than ibuprofen
C. What did Pfizer do?
1. Pfizer instructed its sales representatives to tell doctors that drug could be used to treat acute and surgical pain at doses well above those approved with the knowledge of the dangers associated with Bextra at high dosage levels included kidney, skin and heart risks
2. Pfizer invited doctors to consultant meetings at resort location where expenses were paid and attendees received a fee for being there
D. What happened?
1. Pfizer withdrew the drug in 2005 because of its risks to the heart and skin
E.
Understanding what Pfizer was doing here includes understanding a bit about a pharmaceutical company
1. Research and Development, Product Approval, Sales Representatives, Doctors, Marketing
2. "The whole culture of Pfizer is driven by sales, and if you didn't sell drugs illegally, you were not seen as a team player."
F.
Who is John Kopchinski?
1. Kopchinski was the former Pfizer Sales Rep whose complaint helped prompt the Government's investigation and whose personal share of the settlement under federal whistleblower laws came to $51.5 million.
2. "In the Army I was expected to protect people at all costs. At Pfizer I was expected to increase profits at all costs, even when sales meant endangering lives. I couldn't do that."
G.
Kopchinski was fired by Pfizer in March of 2003, two years before the company pulled Bextra from the market over concerns it raised the risk of heart attacks and strokes.
H. The Bigger Picture:
1. What are the key risk areas that caused this to happen to Pfizer?
a. Regulatory, Selling/Point of Distribution, Failure of Controls/Control Culture designed to promote compliance with legal and regulatory requirements, Whistle blowers, Conflicts of Interest, Reputational Risk, Strategic Risk.
Financial Services Case Study
The Och-Ziff Case-
A. Primary Type of Action: Foreign Corrupt Practices Act Enforcement
B. Who is Och-Ziff?
1. Och-Ziff Capital Management is one of the world's largest hedge funds. As a hedge fund, it selects investment opportunities based on financial market strategies, as well as investments outside of the financial markets that provide investors with a higher return than just investing in traditional markets.
C.
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