The SEC conflict minerals filings for the 2015 reporting year are in. Analysts are reviewing the findings, and will be scoring, rating, ranking, and notifying filers soon. Will ratings tell your management how good your conflict minerals program is? The Forms SD and Conflict Minerals Reports submitted to the SEC are only a brief summary of a year’s worth of effort. But just like a beautiful car, there’s merit in taking a more detailed look under the hood.
On a stroll through the auto show, you’ll see dozens of gorgeous cars. They’re prepared and displayed precisely to give a good impression. EPA ratings will tell you about fuel economy, and you can research reviews online about other aspects of the car. The real test for a car, though, is how solidly it’s built, how well it runs, and how well it suits your purpose. You can’t tell the full story from looking only at the outside.
What Else is there to Know?
The same is true for a company’s conflict minerals program. So when you open the hood, and look beyond the Form SD1 and CMR, what should you look for?
There are many frameworks and principles for compliance, risk management and governance programs. COSO internal controls and enterprise risk management frameworks, and ISO management systems standards are common models to ensure complete, efficient, and effective management of compliance and risk. These frameworks include many issues that affect business – but are not in the OECD Due Diligence Guidelines, and are not typicall included in conflict minerals reporting.
Change management is one such area. Change management practices help achieve consistent program implementation and risk management for anything – and conflict minerals is no exception. Companies are now in their fourth year (2016) of programs to meet the requirements of the SEC’s conflict minerals rule. In this time, companies have changed suppliers and/or products. Roles and responsibilities for conflict minerals compliance may have changed. The issues that pose risk (and appropriate responses) – both key elements of a due diligence program – may have changed.
-Staffing: If a responsibility for conflict minerals has transitioned to a new person, is s/he sufficiently knowledgeable of the SEC Rule, the supply chain, and the organization’s risk management philosophy? -Customers: As customer requirements and expectations have changed, have these been considered in program management? -Systems: As different types of information are required for different reporting purposes, have the IT systems and controls changed to enable reliable data, and to prevent unauthorized alterations? If an organization’s conflict minerals program has not evolved to meet these changes, it can pose risk of non-compliance, falling short in an audit, failing to meet customer expectations – or simply inefficient, ineffective, and costly use of resources for the program.
An Enterprise-Wide Diagnostic
DHC’s conflict minerals program assessment evaluates an organization’s use of standard business principles to effectively and efficiently manage the compliance and business risks posed by conflict minerals. Change management is one of over 20 elements included in this assessment. Like everything else, your conflict minerals program is going to change – why not make sure it adapts to changing requirements, and changes for the better?
DHC has conducted an Independent Private Sector Audit (IPSA) for a public registrant for each year the SEC conflict minerals rule has been in effect. DHC has supported the design and improvement of conflict minerals programs for several clients nationwide. Here is a link to an IPSA on the SEC Website.