CCOs need to enhance ethics and compliance capabilities, says new report

BY Fraser Tennant

Ethics and compliance are the key areas in which chief compliance officers (CCOs) need to improve, according to a new report by KPMG.

In its ‘2019 CCO Survey: Insights for the future of ethics & compliance’ – based on a survey of 220 CCOs representing the largest organisations in various industries – KPMG notes that while most organisations take ethics and compliance risks seriously, the functions need to work on achieving a “trusted advisor” relationship with business front lines.

The report also identifies the top five areas where CCOs plan enhancements to their enterprise-wide ethics and compliance activities: investigations (65 percent), monitoring and testing (65 percent), data analytics (32 percent), regulatory change management (32 percent), and reporting and data visualisation (32 percent).

“There is a growing consensus across all industries regarding the key areas organisations need to focus on and enhance, not only in ethics and investigations but also on the maturity of ethics and compliance programmes,” said Amy Matsuo, KPMG principal and regulatory insights national leader.

“This is likely driven not only by a commonality of risks but also converging business models.”

Despite this, the report found that board of director engagement in ethics and compliance oversight and supervision is strong, and business line accountability for ethics and compliance is well-established. 

In order to improve their ethics and compliance functions, KPMG suggest that organisations: (i) revamp investigations processes, case management, reporting and communication; (ii) embed accountability via ethics and compliance-driven employee metrics; (ii) continue to drive integrated governance and reporting across ethics and compliance, legal and HR departments; (iv) evaluate available data and the integrity of that data for use in predictive analytics enterprise-wide; (v) establish guardrails and new risk processes for evolving business digitalisation, data analytics and automation; and (vi) invest in technology to drive greater data access.

“Increased public awareness and regulatory focus – along with market pressures for greater agility and real-time responsiveness to identify misconduct – are driving organisations to improve their investigations function,” continues Ms Matsuo. “Integrating investigation activities more closely with ethics and compliance risk management by enhancing investigation reporting and investing in new technology, such as AI, can help to consistently identify and analyse root causes and trends and improve the production of investigation resolutions.”

Report: KPMG’s 2019 CCO Survey: Insights for the future of ethics & compliance

ConocoPhillips sells North Sea assets

BY Richard Summerfield

ConocoPhillips, has agreed to sell two UK subsidiaries to Chrysaor Holdings Limited for $2.7bn.

The assets being acquired produced approximately 72,000 BOE in 2018. This acquisition increases Chrysaor's pro forma 2018 production to 177,000 BOE, making it one of the largest oil and gas producers in the UK North Sea. The deal is expected to close in the second half of 2019, subject to regulatory approval and other closing conditions.

“We are extremely proud of the legacy we’ve built in the UK over the last 50 years and are pleased that Chrysaor recognises the value of this business,” said Ryan Lance, chairman and chief executive of ConocoPhillips. “This disposition is part of our ongoing effort to hone our portfolio and focus our investments across future low cost of supply opportunities.”

 “We are excited to play a role in the natural evolution of the North Sea and to enable the safe transfer of assets from major oil companies such as ConocoPhillips to new, well‐funded, privately‐owned operators,” said Linda Z. Cook, chairman of Chrysaor. “This process results in a good deal for both the seller and the buyer, with new asset owners such as Chrysaor bringing the strategy and capital required for reinvestment and growth. The outcome is a reinvigorated oil and gas sector, an extension of the producing life of existing fields and the maximisation of hydrocarbon resource recovery.”

The deal is the latest in a number of transactions which are reshaping the North Sea oil space. Chrysaor, which is backed by private equity firm EIG Global Partners, is already one of the biggest players in the region after acquiring assets from Royal Dutch Shell for $3.8bn in 2017. Chrysaor will fund the deal through existing cash resources and a debt facility underwritten by several banks – including the Bank of Montreal, BNP Paribas, DNB Bank and ING Bank. ConocoPhillips expects to use the proceeds from the sale for general corporate purposes.

News: Conoco sells UK North Sea oil assets to Chrysaor for $2.7 billion

Waste Management agrees Advanced Disposal deal

BY Richard Summerfield

American waste and environmental services company Waste Management has agreed to acquire smaller rival Advanced Disposal in a deal worth $4.9bn, including debt.

Waste Management will pay around $33.15 per share for Advanced Disposal, a premium of about 22 percent to Advanced Disposal’s closing price of $27.14 on Friday 12 April, the day before rumours of the deal first appeared. Once completed, the deal will be Waste Management’s biggest acquisition in more than nine years. The companies anticipate the deal will generate more than $100m in savings and capital expenditures annually after close, expected by the first quarter of 2020.

Advanced Disposal is the fourth-largest solid waste company in the US and provides non-hazardous solid waste collection, transfer, recycling and disposal services in 16 states and the Bahamas. Waste Management is the leading company in the sector. Waste Management has around 21 million customers; the deal will add more than 3 million residential and industrial customers, mostly in the eastern half of the US, where Advanced operates.

“At Waste Management, we focus on creating value for all stakeholders, delivering on our commitments to employees, customers, community partners, shareholders and the environment.,” said Jim Fish, president and chief executive officer Waste Management. “The acquisition of Advanced Disposal extends these commitments by adding complementary assets and operations as well as a team with a shared focus on safety, outstanding service and operational excellence.”

He added: “With this acquisition, we will grow our asset footprint to serve more customers and communities and generate significant growth and value creation opportunities for Waste Management’s shareholders and our combined company’s employee base. Waste Management’s disciplined capital allocation and balance sheet strength position us well to execute upon this unique opportunity to expand our scale and capabilities to serve an even broader customer base and realize the strategic and financial benefits the acquisition of Advanced Disposal creates.”

“We are pleased to have reached this milestone agreement with Waste Management to deliver an immediate cash premium to Advanced Disposal stockholders,” said Richard Burke, chief executive of Advanced Disposal. “We view Waste Management as an industry leader with one of the most respected brands in the nation.

“This acquisition stands as a testament to the strength of the Advanced Disposal business and brings together two strong waste management teams with extensive environmental services expertise to better serve our customers and communities,” he continued. “We look forward to working with the Waste Management team to complete the transaction and ensure that we continue to deliver the highest quality service to our customers.”

News: Waste Management to buy Advanced Disposal for about $3 billion in cash

Chevron to acquire Anadarko in £33bn deal

BY Fraser Tennant

In a deal which it sees as a strong strategic fit, integrated energy company Chevron Corporation has acquired Anadarko Petroleum Corporation, one of the world’s largest independent exploration and production companies, in a transaction valued at $33bn.

The acquisition, which significantly enhances Chevron’s already advantaged upstream portfolio and strengthens its leading positions in large, attractive shale, deepwater and natural gas resource basins, will provide Anadarko shareholders with 0.3869 shares of Chevron and $16.25 in cash for each Anadarko share.

One of the world's leading integrated energy companies, Chevron and its subsidiaries are involved in virtually every facet of the energy industry. The company explores for, produces and transports crude oil and natural gas, as well as refining, marketing and distributing transportation fuels and lubricants, and manufacturing and selling petrochemicals and additives.

The transaction has been approved by the boards of directors of both companies and is expected to close in the second half of 2019.

“This transaction builds strength on strength for Chevron,” said Michael Wirth, chairman and chief executive of Chevron. “The combination of Anadarko’s premier, high-quality assets with our advantaged portfolio strengthens our leading position in the Permian, builds on our deepwater Gulf of Mexico capabilities and will grow our liquefied natural gas (LNG) business. “This transaction will unlock significant value for shareholders, generating anticipated annual run-rate synergies of approximately $2bn and will be accretive to free cash flow and earnings one year after close.”

Upon closing, Chevron will continue be led by Mr Wirth and remain headquartered in San Ramon, California.

“The strategic combination of Chevron and Anadarko will form a stronger and better company with world-class assets, people and opportunities,” said Al Walker, chairman and chief executive of Anadarko. “I have tremendous respect for Chevron’s leadership team and believe its strategy, scale and operational capabilities will further accelerate the value of Anadarko’s assets.”

The acquisition is subject to Anadarko shareholder approval, regulatory approvals and other customary closing conditions. 

Mr Wirth concluded: “This transaction creates attractive growth opportunities in areas that play to Chevron’s operational strengths and underscores our commitment to short-cycle, higher-return investments.”

News: Chevron to buy Anadarko for $33 billion in shale, LNG push

Tax teams under pressure to invest in technology, says new survey

BY Fraser Tennant

The continued globalisation and digitalisation of tax is putting tax professionals under pressure to invest in new technologies, according to a new survey by Thomson Reuters.

In its ‘2019 European Tax Technology Survey’ – which polled 438 tax teams across a wide range of industries, including banking, manufacturing and services – Thomson Reuters reveals that 98 percent of tax professionals plan to invest in tax technology over the next 12 months, compared to only 54 percent in 2018. Moreover, the main driver behind the anticipated investment is the rise in digitally capable tax authorities.

Recognising the need for increased efficiency for internal processes and workflow, 45 percent of survey respondents said that they had started or have plans to implement digital tax filing and compliance for new standards such as MTD and Standard Audit File for Tax (SAF-T) – the international standard for the electronic exchange of reliable accounting data, as defined by the Organisation for Economic Co-operation and Development (OECD).

Key findings from the survey include: (i) 76 percent of senior tax executives have seen an increase in attention on tax compliance and planning at board level; (ii) 28 percent of tax teams plan to increase spend significantly in the next 12 months – mainly to address the needs of digital tax reporting; (iii) managing compliance across multiple jurisdictions continues to be the biggest challenge, although preparing for Brexit had also significantly increased in importance; and (iv) 89 percent consider tax technology as strategic to the success of their tax function, although only 39 percent have a tax technology strategy.

“The survey indicates that many tax departments are looking to centralise and manage compliance across multiple jurisdictions, in response to the continued globalisation and digitalisation of tax,” said Steve Smith, proposition lead, corporates at Thomson Reuters. “The interest in new technologies also suggests that tax departments are recognising that the deployment of tax technology can help increase efficiencies, reduce human error and deliver a consistent and manageable way of addressing these new tax regulations.”

In addition, the survey found that there is an appetite within tax departments to adopt in-house technology, rather than outsource, suggesting a desire to take control of the digital tax transformation process.

Mr Smith concluded: “It is inevitable we will see more jurisdictions following suit in the coming years, and multi-national corporations need to be prepared to address these requirements with future-proofed technology solutions.”

Report: 2019 European Tax Technology Survey

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