In the US and around the world, there is an extraordinary increase in focus on global compliance, especially in light of recent changes to the Iran sanctions landscape. The reach of emerging sanctions programs now extends to a much wider range of industry sectors, transaction types and companies. This expansion of sanctions and concern about enforcement is unlikely to recede at any point in the near term, absent a dramatic intervening event, such as Iran's development of a nuclear weapon or a military strike on that country. Accordingly, to mitigate potential exposure, now is the time for companies to implement global risk management best practices.
A growing recognition of the danger posed by a nuclear Iran and the fluid nature of the Iran sanctions environment have significantly raised the stakes for any company with a potential nexus to Iran. The nature of risk management has changed in the wake of recently enacted international and national Iran sanctions regimes, and the unprecedented regulatory, political, media, shareholder and stakeholder group focus on adherence to these sanctions. Addressing this risk requires more expansive understanding of these dimensions on an enterprise-wide basis, given the increasing emphasis within the sanctions regimes on both direct and indirect exposure to Iran or entities doing business in Iran. Running afoul of Iran sanctions, or being perceived to have run a foul of the sanctions, carries with it potential investigations or legal penalties, as well as potential profile risk to the public image of a company. Violations or perceived violations also pose business risk that can dissuade consumers and counterparties, and the risk of policy and political consequences from government attention.
While legal risk often has a directly measurable financial consequence, profile risk, business risk, and policy and political risk can have just as much impact on the bottom line and market position of a business, even where these other aspects of risk are not as readily quantifiable. Examples of the consequences of exposure to these types of risk include Congressional oversight investigations and hearings, enhanced regulatory supervision, bad press and negative publicity, and activist shareholders. Profile, business, and policy and political risk are also manifested through increased counterparty due diligence. Regulators are actively approaching private sector parties to identify indirect exposure to Iran, and seeking support from the private sector in ensuring sanctions are effective. Having advance warning of these potential areas of risk (including indirect exposure to sanctioned parties) is a necessary first step to managing the growing business risk.
In this environment of heightened focus on Iran, it is critical that companies understand the sanctions landscape: the rules of the road, enforcement trends, and tools for navigating the current environment. Much as the creation of FinCEN and post-9/11 changes to the regulation of financial institutions through the PATRIOT Act shaped a new compliance posture, the growing awareness of the danger of a nuclear Iran and the dynamic nature of the Iran sanctions landscape counsels in favor of a new approach to global risk management.
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