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JUNE 2012


Red Flag Group


25


Scott answered: “I had been working in-house with large companies for almost ten years and I had found that the role of the regional General Counsel was being expanded to cover areas including Compliance. For most local counsel this is typically covered at a ‘corporate level’, however, these resources are very thin on the ground in international markets. With that model, the local counsel very often get involved in Compliance issues and need to learn quickly how to implement compliance and manage the compliance programs. I found that in building these programs there were no external consultants to help me in building out the programs. Law firms and ‘the Big 4’ were helpful but really were not very practical and business focused as what I would like. I also wanted to find solutions for my problems, due diligence, on-line compliance tools, document management etc, and simply couldn’t find any in the market. So, like many entrepreneurs, I decided to do it myself. My then employers, Hitachi Data Systems, were extremely supportive and gave me a great deal of support and comfort that they would likely engage our Firm if we developed these products.”


All companies face challenges, whether large or small, and Red Flag Group is no different. Explaining the main challenges the company faces on a regular basis, Scott said: “The firm has almost tripled in revenue every year since its creation, and our clients are some of the largest companies in the world, operating in large disparate markets. This has meant that we have had to scale the business very quickly, expand our offerings to meet the clients’ demands, grow our overseas offices and really focus on quality and perfect delivery every single time. Last year, we did work in over 179 countries including Afghanistan, Iraq and Africa. Wherever our client base is operating is where they need our help.”


A recent article written by Scott was entitled ‘Fighting Fraud Internally When Dealing With International Firms’, and when asked if this was a major concern


within his role, he explained: “Any large company that operates in international markets will have compliance and fraud issues. If they don’t, then they are not looking hard enough. It is inherent in any business; it is human nature that when a control is lacking, opportunity for exploitation will arise. That being the case, all our clients are working on that issue every single day.”


Continuing on to explain how Red Flag Group fights fraud when dealing with companies overseas, Scott said: “Fighting fraud is likely managing any compliance program.


It involves gaining the


commitment to fight fraud, showing the value to the business, the likely savings and benefits to the business. Once commitment is obtained, you build the program itself, policies, procedures, internal controls, behavioural change, training and communication. Once implemented, it is about the monitoring and measuring, testing the controls and looking for gaps and weaknesses. Identifying those weaknesses will lead to investigations and reviews of operations which will lead to improvements in managing risk and potentially significant savings.”


Regulation and legislation of course affects corporate governance firms greatly. Going on to explain which legislative changes have most affected Red Flag Group recently, Scott said: “The Bribery Act in the UK drove our US clients to reconsider their global corruption programs and our UK clients to actually create them. This was by far the largest legislative change in 2011. More recently, the sanctions placed by the US on companies dealing with Iranian interests has led many of our clients (particularly those in the oil and gas industries) to look at their business dealings and processes in working with companies in the Middle East. This has led to an uptick in enhanced due diligence on counterparties and suppliers. For our extractive clients (mining and gas) new laws around conflict minerals and ethical supply chain have meant that looking


at source material has been key. Again, the solution was greater focus on due diligence.”


Scott went on to explain that he currently does not feel the need for any further regulatory changes, saying: “In most of the markets around the world, the regulations are in place. The problem is that governments simply don’t enforce them. This is the case in many countries that have anti-bribery laws but have never prosecuted anyone, or when they do it is specifically for political gain. So, I would focus on enforcement rather than simply creating more laws.”


By way of a conclusion, Scott was asked to tell us about the highlight of his career so far, to which he answered: “The highlight has been creating the firm and having it be seen as one of the leading Compliance and Corporate Governance Firms. When Fortune 100 clients recommend us to another Fortune 100 company as someone that is a thought leader – that is certainly a highlight.” LM


For more information about the Red Flag Group, please visit: www.redflaggroup.com.


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