The Cost of non-compliance: Financial and Reputational Consequences - Wells Fargo

The Cost of Non-Compliance:

Financial and Reputational Consequences

19 November 2014

Presented by: Louise Li

Key Issues

1. Are companies ready?

2. How do we educate business stakeholders?

3. What approach is required to deal with additional

international transparency requirements ?

Are Companies Ready?

Answer - Probably not

What do they need to be ready for?

• Change in profile

• Integration

• Operating in new jurisdictions

• Addressing risks identified in the due diligence

• Tax risks

Tax Risks

1. Real risks

1. Threats on the horizon

2. Risks not involving taxpayments

Planning for risk needs insight & judgement

Tax Risk – Reputational Risk

• Risk– Has the law been broken– Has the company acted unfairly– Mergers

• Readiness– Risk analysis– Assess tax benefit– Policies and procedures

• Reaction– Containment– Planned response– Advance planning

Tax Risk - What is the Source of

Reputational Damage

It takes 20 years to build a reputation and 5 minutes

to ruin it. If you think about that, you’ll do things differently ( Warren Buffet)

Tax Risk - Reputational Risk

Readiness and Reaction

Readiness• Perform risk analysis• Assess tax benefitReaction• Policies and procedures• Containment• Think of response• Advance planning• Recovery

Reputational Risk –

Key Takeaways• We are alert to yesterday’s risk but we must

understand the risks we are facing today and tomorrow

• Have coordinated internal procedures in place that have been tested

• Prepare now. Don’t wait for the external stakeholders to ask those awkward questions

• Have a global response to local issues• Understand the media. There are multiple risks

and hence multiple ways to address them

How Do We Educate

Business Stakeholders?

• How risks get identified

• How risk exposures are assessed

• How risks can be mitigated in short and medium term

• How risks are reported

• Forums for reporting

International Transparency

• The austerity measures of tax authorities have driven the interest in tax

• It is not going way

• It is an international, not local, issue

• Companies need to seize the initiative

• Consider where to report

Transparency

Question - Why is transparency the new buzz word in governance and what is its impact?

Answer - Fair tax debate

Group Tax Strategy

Conclusion

Companies need a strategic approach to tax risk to allow them to focus on future risks and opportunities that could arise.

This is a group wide responsibility and not just with the tax department.

Our internal and external audience is changing as is the data required and the form of communication.

We need to take the initiative now.

Louise Li

[email protected]

Twitter thelouiseli