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The Morning Risk Report: Risk and Compliance Pros Gird for a Potentially Tumultuous 2023
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Good Morning and Happy New Year! If 2022 has taught risk and compliance professionals anything, it’s that change is constant and new challenges can emerge at any moment to make your job even more complex.
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Last year saw regulators ratcheting up scrutiny on a variety of fronts, especially the volatile cryptocurrency sector. Risk and compliance executives, meanwhile, dealt with the aftermath of the coronavirus pandemic while taking on the added effects of a war in Ukraine and the ensuing impact on everything from the supply chain to sanctions enforcement.
We start off 2023 with articles that look at some of the big issues that risk and compliance executives could face in the coming year.
Former FTX staff face the job hunt: Former employees of FTX and other failed crypto firms will likely face extra scrutiny in their job hunt as details of the crypto exchange’s collapse continue to unfold. But recruiters and hiring managers told Risk & Compliance Journal’s Mengqi Sun that they can move on if they are transparent about their past employment.
The career advice comes after a year of turmoil in the crypto industry, including several bankruptcies, which decimated digital asset values and dulled the luster of the once-lucrative sector. While not all of the failed firms are associated with fraud allegations like FTX, anyone who worked at these businesses could face a tough slog finding their next job.
Preparing for a potentially bumpy 2023: Risk experts and executives expect the tumult of 2022 to continue into the new year, R&C’s Richard Vanderford reports, with an economic slump, the continuing threat of cyberattacks and ever-growing regulatory demands topping the list of concerns.
One risk they see receding in prominence: the pandemic.
“There’s a general acceptance of ‘This is now the world where we live,’” said Kevin Bates, the group head of risk and insurance for Sydney-based real-estate company Lendlease and a board member of risk management association RIMS. “And I think that’s a positive thing.”
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Dr. Anthony Klotz, who coined the term the “Great Resignation.”
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U.S. bars imports from three companies. U.S. Customs and Border Protection has barred imports from three companies, including a supplier to Western apparel companies, that the agency says could be using North Korean forced labor.
As part of a broad crackdown on goods made with forced labor, Customs last week said it had used a 2017 law that imposed sanctions on North Korea to detain imports from three companies, adding that it found indications that all three use North Korean workers, which under U.S. law are assumed to be forced laborers unless proven otherwise.
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Aerospace company Safran settles U.S. bribery probe. The French company will pay about $17.2 million as part of a settlement with the U.S. Justice Department over bribes that subsidiaries allegedly paid in China. Prosecutors will require Paris-based Safran to turn over profits from the “corruptly obtained” contracts, but won’t otherwise prosecute or penalize the company, they said in a letter made public Dec. 23.
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The collapse of FTX has eroded cryptocurrency firms’ standing in Washington, dimming the prospects for industry-backed legislation and raising pressure on regulators to step up enforcement.
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A surge of Justice Department resources into cryptocurrency investigations more than a year ago helped prosecutors quickly charge FTX founder Sam Bankman-Fried and augurs a spate of aggressive enforcement ahead, according to the department’s second-ranking official.
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The U.S. government’s aggressive approach to antitrust enforcement faces key tests in 2023, with rulings expected in several high-profile cases against Silicon Valley technology giants.
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And federal lawmakers have signaled that they will investigate the mass flight cancellations by Southwest Airlines Co., with some Democrats suggesting the Transportation Department should be more aggressive at protecting passengers.
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ILLUSTRATION BY ALEXANDRA CITRIN-SAFADI/THE WALL STREET JOURNAL
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Big banks predict recession, Fed pivot in 2023. Big banks are predicting that an economic downturn is fast approaching.
More than two-thirds of the economists at 23 large financial institutions that do business directly with the Federal Reserve are betting the U.S. will have a recession in 2023. Two others are predicting a recession in 2024.
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The labor market proved to be a resilient stabilizer in 2022 for a U.S. economy facing the highest inflation in four decades.
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The International Sustainability Standards Board this year plans to complete two rule proposals that would cover companies’ disclosures of climate-related risks to their business and broaden the sustainability standard-setter organization’s focus to include corporate reporting on biodiversity and other topics.
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The Kremlin’s invasion of Ukraine splintered the global energy market into countries that buy Russian oil and those that don’t. This year could provide hints about how long the split will last.
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While the U.S. has sought to persuade countries to reduce their dependence on China, trade ties between the world’s second-largest economy and the rest of Asia are deepening as economies grow and companies refashion supply chains.
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As the war in Ukraine continues into 2023, Europe has never been as united against Vladimir Putin’s Russia—nor as dependent on the U.S. for holding the Russian leader back.
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The FASB will likely finalize a rule in 2023 requiring public companies to start breaking out big-ticket expenses incurred by their business divisions, says board chairman Rich Jones. PHOTO: FINANCIAL ACCOUNTING FOUNDATION
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FASB looks to advance projects on tax, crypto and expenses. The U.S. accounting rule maker in 2023 wants to get closer to finalizing key rules, ranging from companies sharing more details on cryptocurrency holdings to breaking out certain expenses on income statements. The upshot: A wave of more work for businesses, more details for investors and more accurate accounting.
FASB launched new projects following an agenda consultation with investors and other stakeholders in 2021, its first in five years. That led to the FASB incorporating more investor views and accelerating certain existing projects. It also led to efforts aimed at setting new accounting and disclosure requirements for public and private companies.
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ILLUSTRATION BY ALEXANDRA CITRIN-SAFADI/THE WALL STREET JOURNAL, PHOTOGRAPH BY STUDIO GRAND WEB
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Wall Street’s bankers brace for big pay cuts. Big Wall Street banks are cutting bonus pools sharply—including by as much as 40% at Goldman Sachs Group Inc.—to contend with a dealmaking slump, according to people familiar with the matter.
Executives across firms including JPMorgan Chase & Co., Bank of America Corp., Citigroup Inc. and Jefferies Financial Group Inc. are moving forward with plans to cut their own bonus pools by some 30%, according to people familiar with the banks.
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The cost of transporting shipping containers has dropped. PHOTO: DAVID WALTER BANKS FOR THE WALL STREET JOURNAL
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Supply chains upended by Covid are back to normal. The Covid-19 pandemic might not be gone, but the global supply-chain crisis it spawned has abated.
Goods are moving around the world again and reaching companies and consumers, despite some production snarls and Covid outbreaks inside China. Gone are the weekslong backlogs of cargo ships at large ports. Ocean shipping rates have plunged below prepandemic levels.
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Tesla Inc. delivered fewer vehicles in 2022 than it initially targeted, capping a year during which the stock suffered its worst annual performance as demand appeared to soften and Covid-related production disruptions persisted.
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Twitter Inc. was accused of not paying its rent in a lawsuit filed by the landlord for one of its offices in San Francisco.
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After more than two years of pandemic-related upheaval, businesses in many corners of the economy are seeing their Covid disruptions recede.
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The Southwest Airlines Co. meltdown that stranded thousands of passengers during one of the busiest travel weeks of the year exposed a major industry shortcoming: crew-scheduling technology that was largely built for a bygone era and is due for a major overhaul.
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S&P 500 companies spent a record amount on dividends this year, a trend that is expected to continue in 2023 despite a slowing economy as more of the companies that had suspended or cut their dividends early in the pandemic resume payouts.
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