I was struck by the reports where BTG tells the market that it is “business as usual” a mere two days after its controller was arrested. It seems like a slightly incoherent, not to say contradictory, position. It made me think.

Abroad, the issue of corporate corruption became a strategic demand for companies and anti-corruption compliance changed gears — it jumped from management level to board level. This evolution, which had already been taking place a few years ago, was crowned with the Volkswagen scandal. There is no longer a doubt: crisis management is now recognized as a basic component of any corporate compliance system and the executive responsible for the compliance area is now part of the so-called “C-Suite” - where the organization's highest managers are, at the center of power, responsible for making the most important decisions. The name comes from “C” for “Chief - as CEO, for Chief Executive Officer, COO (Chief Operating Officer) and so on, now becoming CCO - Chief Compliance Officer”.

Crisis Management

In Brazil, the last year was marked by the unprecedented arrests of chiefs of large contractors, by accusations and counter-accusations of corruption and extortion, and by prize-winning pleas. In crisis management language, they are companies facing anomalies due to corruption scandals. For the first time, justice authorities are managing to keep pizzerias away. Even so, until the first half of this year, it seemed that, despite all the arrests, there was a small group of true “untouchables” left.

I myself thought the scandal could be contained - and I was never alone in that feeling. I remember a meeting with one of the most respected private bankers in Brazil in April of this year. At a certain point he started talking about Operation Car Wash. Despite the arrests, he pondered, two groups had untouchable status—Odebrecht and BTG. He was sure: those arrested by the authorities would never bite there. Yeah, but they arrived.

With the right data in hand, wouldn't that perception, which was mine and also that of my fellow banker, be another? Absolutely, yes. Let's clarify. The “crisis management” activity encompasses two different fronts. The best known is that of crisis communication. It is usually up to a marketing, advertising or communication professional to advise the company on what message should be transmitted to stakeholders in a crisis situation. Perhaps he was the person who advised BTG's top management to send the message of “business as usual” to the market. I don't dominate and I don't meddle in this area. I don't have the skills to evaluate any crisis communication consultancy. I can only observe, as I consider myself, after almost 30 years in Brazil, an observer of Brazilian culture.

But the other aspect of crisis management - and this is my area of expertise - involves the most “visceral” part of the company, the daily life of the organization. The processes, controls, systems, markets, and most importantly, people—from the receptionist to the president. While the communication professional takes action after the scandal broke out, my work begins much earlier - the moment one of the chiefs has the vision, the awareness, that there is a situation that could become a crisis. In animal terms, if Wolfe does his job well done, the situation will never turn upside down. This is the essence of the art of managing “special situations”. It is necessary to identify and recognize the existence of a situation with the potential to become a crisis. Once recognized, the work involves investigating the facts and evaluating the vulnerabilities and potential implications to take steps to resolve the situation and put the company back in “business as usual” mode. The art is to make stakeholders not even notice that there was a time when “business as usual” was not lived.

Perhaps for this reason I am known as a financial crime investigator and not as a “special situations” manager. The “crises” in which I am hired to work do not become public scandals. They are solved first. The instant the situation returns to the status of “business as usual”, my client no longer needs me. Then I return to the shadows. Nobody knows anything.

From this perspective, I pose three academic questions regarding these (and others that have emerged) ex-untouchables.

1) Was there a time when an advisor or member of the group's top management could have realized that there was a situation with the potential to get out of control?

2) What could have been done at that time to reverse, control, contain, or at least begin to manage the situation?

3) More complicated, the Brazilian company exists and operates in an economic and political environment characterized by relationships and incentives that are borderline hidden and perverse. As soon as a scandal breaks out in such an environment, a mobilization of commercial and political relationships, of actions and reactions, of measures and countermeasures motivated by a mixture of greed, fear, commitment and power takes place (and has happened). In this reality, top management cannot adopt an ostrich stance. You have to walk the tightrope of pressure and pressure. So, what actions could have been taken, but weren't, to avoid the current situation? And what actions should not have been taken?

I will end with a fourth question, this time not an academic one, but a factual one. Did these former untouchables have someone in the top management, or advising the top management, whose responsibility it was to raise issues like these? On second thought, perhaps the answer lies in the question itself. Of two, one: either there was no one with this responsibility or there was but their advice was not followed.

*Postgraduate lawyer in Economic Law from Yale Law School and Master in International Law from Cambridge, Barry Wolfe is director of Wolfe Associates (www.wolfe.com.br), a consultancy in preventive compliance, risk assessment and corporate fraud investigation.

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