Watching the dominoes fall

Who would have anticipated the outcomes flowing from the VW scandal, either from risk or crisis management perspective?  How would you quantify the potential losses to the company from this scandal?

Summarizing:

  • The EPA established test standards and protocols for emissions testing of vehicles
  • Some auto manufacturers design around the protocols.
  • The EPA makes some designing-around illegal.
  • VW allegedly designs software that causes the engine to work one way when under test conditions and another way when on the road. (Actually, another company designed the software, but advised VW in a letter that using the technology was illegal.)(This letter was located by the internal auditors.)
  • VW advertises a lot, trumpeting the environmental test results.
  • People buy a bunch of VW cars.
  • VW gets caught (they knew they were caught several weeks before they fessed up).
  • The cars consumers bought now aren’t in compliance, and have lost a lot of value.
  • Customers who financed through VW claim fraud.
  • VW’s other brands suffer (Bentley, Lamborghini, Audi, and Porsche).
  • The chairman resigns.
  • VW loses 30% of market cap, hires Kirkland & Ellis.
  • Huge impact to German economy.
  • Germany plans criminal investigations.
  • Shareholders suffer huge losses.
  • Suppliers of diesel engines scramble, dropping more than 9%.
  • VW takes a 6.5 billion euro charge.
  • Discovery specialists circle the body, considering the amount of litigation and cross-border discovery coming soon.  Privacy experts and works councils are speechless.

From a compliance point of view, this says a lot about the culture at VW, which allowed this behavior to continue unabated.  And the internal controls weren’t effective.

What does this have to do with information governance?  Well, at the core this is fudging the data you give to the government (even if that isn’t your home government).  How many controls do you have in your organization to make sure the information you give to others is accurate and complete?  Are those controls effective?  Do you need more?

Will individuals go to jail?

See “VW Scandal Affects Finance Units,” The Wall Street Journal, September 28, 2015 B1.

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