In a compliance meltdown, failure is on such a massive scale that it can put the company in peril of dissolution. Reputation is lost, customers and suppliers avoid the organization, talent leaks away, and the business is starved of the fuel it needs. In the most severe cases, the entity ceases to function, as happened at Arthur Andersen & Co. Most cases are not fatal, but they still send the entire senior management team into crisis mode. Needless to say, legal counsel find themselves on the front line. For those inside the company, it is not just a matter of investigating and settling but also of putting in place new practices to better detect, and avoid, compliance disasters in the future.
In a meltdown, there are no second chances. The consequences of another failure after settlement are so severe that no matter what effort goes into investigating and settling, success only comes from real and lasting changes in how people go about their daily tasks. This is not only to avoid, for example, the call option on a deferred prosecution agreement, or to satisfy a monitor from the Securities and Exchange Commission. People inside the organization need to feel that they have a chance to make a clean break and not be brought low again with more bad news.
