With this episode of the Managing Uncertainty Podcast, we’re joined by all members of our consulting team at Bryghtpath, including the return of the previous co-host Jennifer Otremba, who has returned to us safely after a year of military leave.
Moving forward, we plan to release two episodes weekly.
In this episode of the Managing Uncertainty Podcast, we’re covering recent developments with Wal-Mart’s Foreign Corrupt Practices Act (FCPA) settlement with the US Government, the recent Mayoral elections in Istanbul, Turkey and its impact on national politics there, and the recent escalation in conflict and tension between the United States and Iran in the Persian Gulf.
| Bryan Strawser: | Welcome back to the Managing Uncertainty Podcast. This is Bryan Strawser, principal and CEO at Bryghtpath. I want to talk a little bit about some changes that we’re going to make to the podcast starting with this episode. We have decided now to release two episodes each week, and they’re going to have a little different focus.
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| Bryan Strawser: | The first episode each week, the one that you’re listening to right now is going to be more of a news and current events-focused discussion. We’re going to look at somewhere between three and five things that are happening in the news or are planned to happen in the coming days that are relevant to your preparedness capabilities around the world.
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| Bryan Strawser: | So joining me for this discussion will be the rest of the Bryghtpath consulting team, Jennifer Otremba and Bray Wheeler. I’m going to have Jenn and Bray introduce themselves, and then we’ll come back to me and talk a little bit about what this is going to look like. Jenn?
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| Jenn Otremba: | Hi, I’m Jenn Otremba. I’m a senior consultant here at Bryghtpath.
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| Bray Wheeler: | Hi, this is Bray Wheeler. I’m a consultant here at Bryghtpath.
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| Bryan Strawser: | Why don’t each of you talk just a little bit about your backgrounds for a little bit?
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| Jenn Otremba: | Sure. I’ll start if you want.
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| Bray Wheeler: | Sure.
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| Jenn Otremba: | So I started at Bryghtpath a few years ago now, but I took a little bit of a leave of absence. I’m also in the National Guard. I’ve got over 20 years experience with the military. I’ve been gone for about almost a year, right guys?
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| Bryan Strawser: | Yeah.
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| Jenn Otremba: | Over in the Middle East working.
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| Bryan Strawser: | I like how you said you kind of took a sabbatical, but it’s not this was by choice.
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| Jenn Otremba: | Yeah. No, no a little bit of a break from Bryghtpath for my other career path there.
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| Jenn Otremba: | I know that I have introduced myself before on the podcast, but as a reminder, I worked with Bryan for quite a long time, and Bray as well, when we were all at Target together.
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| Bryan Strawser: | Mr. Wheeler?
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| Bray Wheeler: | Yeah, I’ve been with Bryghtpath just about a year now. So before that, I worked, like Jenn mentioned, with Bryan and Jenn at Target doing a lot of different stuff. I’m brand new to the podcast. My background is everything from crisis managements in an operation center to enterprise crisis management to intelligence to corporate security. I touched just about everything [crosstalk]
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| Bryan Strawser: | This is Bray’s first episode on the podcast despite almost a year of trying to get him to do a podcast.
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| Jenn Otremba: | So I show up, and Bray’s all in.
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| Bryan Strawser: | Yeah, exactly.
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| Bray Wheeler: | Yep. Got to lighten the load a little bit. I got to deflect it just a little bit. Take the pressure off.
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| Jenn Otremba: | Yeah.
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| Bryan Strawser: | So this change in our format came from discussions that the three of us were having at the tail end of last week. But we’ve kind of been thinking about this for a while. I think there’s a place in the market to have discussion about more current events as they happen without going into kind of the deep dive process discussion, which is what our typical episode has been. So we hope you find this valuable. We think this is going to be an interesting conversation.
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| Bray Wheeler: | Yeah. No, I think it brings a little bit of something different than just kind of, to your point, deep diving into something. It’s a little bit more of, hey, what just happened in the last week, and what do we kind of expect?
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| Bryan Strawser: | A little bit of interpretation
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| Bray Wheeler: | Yeah.
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| Bryan Strawser: | Yeah, what does that mean?
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| Jenn Otremba: | Plus, let’s face it. We’re all sitting around talking about what’s going on in the world-
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| Bryan Strawser: | That’s right.
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| Jenn Otremba: | … every day anyway, so we might as well talk about it with everyone.
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| Bryan Strawser: | That’s right.
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| Bray Wheeler: | Right.
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| Bryan Strawser: | And I think we may bring some things to the forefront that maybe you’re not thinking about. I know this is going to happen with one of the topics we’re going to discuss today. Maybe it’s something you should be thinking about, because it will have future impact on what we do.
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| Bryan Strawser: | So let’s move right into the topics we have for today. The first one, which I’ll kind of tee up the discussion is from a Wall Street Journal article the tail end of last week. This is the announcement from the U.S. Department of Justice that Walmart has agreed to plead guilty and pay $282 million in a Foreign Corrupt Practices Act case involving facilitation payments that Walmart made in Brazil, China, India, and Mexico. This is at the tail end of a six-year discussion and investigation that’s gone on between Walmart and the United States government to get to this settlement. It requires Walmart to pay $144 million in ill-begotten gains to the Securities and Exchange Commission and $138 million FCPA penalty to the U.S. Justice Department. It’s one of the largest cases, if not the largest cases, ever.
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| Bray Wheeler: | It’s a big number.
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| Bryan Strawser: | Huge number. This investigation started, according to this article, in 2012, which had an investigation from the New York Times about payments that Walmart had made in Mexico in order to obtain permits to build stores there. Then it expanded to Brazil, China, and India. Reactions?
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| Jenn Otremba: | I mean, I’m shaking my head. From a business perspective, this is a huge deal, right, of crisis management. I can’t imagine what they’re doing in their ops center as this is starting to hit the news.
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| Bryan Strawser: | There’s certainly a reputational issue here. I mean, Walmart already has had over the years some challenges reputationally with its compliance with various aspects of law, but not necessarily recognized as a place where workers are treated fairly and a lot of various exploitation of communities and stuff that have been alleged along the way. Then here comes this massive bribery case.
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| Bray Wheeler: | I think for Walmart, too, the amount of money probably isn’t the issue for them. It’s the having the largest fine ever and the reputational fallout of it is … I mean, for companies that hurts more so than the fines, especially for a company the size of Walmart.
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| Jenn Otremba: | And what do you guys think as far as Walmart goes? Do you think it’s going to have a huge reputational impact? I mean, do you think that Walmart shoppers care about this?
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| Bryan Strawser: | No, I don’t.
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| Jenn Otremba: | Because I don’t know that I do either. I think other companies, this would be a bigger hit, but I don’t know that Walmart would be as affected.
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| Bryan Strawser: | I think we were discussing this on Friday with one of our clients just on our regular status call, that this news had just come out. This is a company that operates internationally and particularly in Asia. They’re in India. I think it immediately kind of raised his hackle from the standpoint of, “Well, I wonder what we’re going to do about this.” Because obviously, there was heightened intensity that led to kind of this issue.
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| Bryan Strawser: | I mean, it’s kind of interesting that if you get into the article, Walmart has spent $900 million investigating this over the last seven years internally. That doesn’t count the fine and the SEC payment. But at the core of the issue, in terms of what was alleged by the SEC and the DOJ is that Walmart grew significantly in the 1990s, and they didn’t ramp up their systems to account for corruption risk. There’s kind of a systematic accusation here that they weren’t prepared to deal with the possibility that this might happen.
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| Bray Wheeler: | Well, it’s one of those, ignorance is not an excuse at that point. You’re so heavily focused on expanding the business that you’re not accounting for those people you’re hiring on the other end, the partners you have on the other ends just awareness to that process, that it’s not the same old, same old environment you’re used to.
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| Jenn Otremba: | I guess I would argue what other large corporations are also not prepared for this type of thing that have had huge growth in a short period of time, just like Walmart.
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| Bryan Strawser: | A lot probably.
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| Jenn Otremba: | A lot, right?
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| Bryan Strawser: | I would think.
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| Jenn Otremba: | Walmart’s just the one that’s hit the news and is getting caught right now.
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| Bryan Strawser: | Right.
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| Jenn Otremba: | Do you think that this is going have a long effect on other corporations as this has come out?
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| Bryan Strawser: | I mean, I think the wake-up call here is probably around, as global expansion ramps up, your compliance capability needs to ramp up with it. We have other clients that have had some FCPA challenges related to bribery in foreign countries, where the same thing happened. They grew rapidly, they spun up global operations, but they didn’t spin up a compliance capability to make sure that folks were educated and that they were looking for these issues, right? I mean, that’s really what the SEC is accusing Walmart of, is they didn’t ramp up their capabilities as they grew so much internationally. We’ve been through this.
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| Jenn Otremba: | Right.
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| Bryan Strawser: | Both as employees and as a consulting firm. I did find the Brazilian accusations kind of interesting, because when I was in business school, our international residency was in Brazil. We were divided into groups after the two-week trip to Brazil. Each of our groups had to get up and talk about a specific aspect of what we learned in Brazil. My team got tax, which was really not that interesting. But another team had business ethics and compliance, and the subject of their presentation was … When they got up, they put up a slide in Brazilian colors and it said, “Corruption and business ethics in Brazil, this shit is corrupt.” That was the presentation. Mind you, it was our last presentation before graduation, so we may have been a little punchy.
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| Bryan Strawser: | We all heard this in different aspects of our own careers, that you’d go to India, go to Brazil, or go to Mexico, and facilitation payments, AKA bribery, are the norm.
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| Jenn Otremba: | Yeah.
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| Bray Wheeler: | Yeah. [crosstalk]
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| Jenn Otremba: | They’re part of business.
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| Bryan Strawser: | Yeah.
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| Bray Wheeler: | Yeah, it’s part of the culture. That’s what they’re used to. So if you go into those places relying on kind of the experts on the ground, they’re going to go with what they know, and that’s how they do business.
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| Bryan Strawser: | Right.
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| Jenn Otremba: | Right.
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| Bryan Strawser: | We had a criminal case in India once that we were dealing with in our prior life where we attempted to get some prosecution on a case. The local police commander was like, “I also would really like a bike like that one.” “But we’re filing a prosecution.” “Yeah, but I would like a bike, like that bike, that motorbike, motorcycle.” So needless to say, the person didn’t get prosecuted. We didn’t buy him a motorcycle.
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| Bryan Strawser: | Jenn, what’s our next topic?
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| Jenn Otremba: | Okay, so everyone’s favorite discussion, the Middle East, and Iran is basically the update. I think it’s important to continue kind of keeping an eye on what’s happening in the Middle East, and specifically what’s happening with Iran, because some of the latest things that have come out are … Obviously, we saw that a drone was shot down. Everyone’s seen that on news now. We’ve seen how the United States has responded to that, or not responded depending on what your opinion is on what should be done or what shouldn’t be done.
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| Bryan Strawser: | Or who you want to believe.
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| Jenn Otremba: | Yeah, and I’ve seen some discussions around cyber attacks. I’ve seen new sanctions that are going to be put in place for Iran. Then the reaction for what Iran’s going to think about that or what their reaction’s going to be towards the United States. And through not just the United States, but other coalition forces around the world.
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| Bryan Strawser: | So two things have happened, right? There was a tanker attack now two weeks ago.
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| Jenn Otremba: | Yeah.
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| Bray Wheeler: | Multiple tankers.
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| Bryan Strawser: | Yeah, two tankers. There is some dispute about exactly what happened and who’s behind it. But the attack was limpet mines, which are magnetic mines that are usually placed by a diver. It’s the Navy Seals’ preferred way to sabotage a ship. One of the ship’s crew on one of the tankers said they saw a torpedo, so maybe it wasn’t a limpet mine. There’s dispute, debate. I don’t know, disinformation.
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| Bray Wheeler: | There’s even reports that crew members were reporting a shell somebody actually fired over the waterline.
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| Bryan Strawser: | Like artillery.
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| Bray Wheeler: | Like artillery shell.
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| Bryan Strawser: | Not artillery, but like a ship to ship.
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| Bray Wheeler: | Yeah.
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| Bryan Strawser: | Yeah. It’s fascinating.
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| Jenn Otremba: | Yeah, it is.
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| Bray Wheeler: | Lots of accounts.
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| Jenn Otremba: | Yeah, rumors.
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| Bryan Strawser: | The U.S. State Department has said it was Iran that was behind it, but other countries are disputing this, I believe.
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| Jenn Otremba: | Of course, yeah.
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| Bryan Strawser: | Yeah. So we have that. That’s two weeks ago. That ramped up some tension. Then last week, what happens? You get the drone shot down. Iran claims it was over their territorial water. We said it was in international air- I’m sorry, it was the international airspace. They claimed it was in their airspace.
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| Jenn Otremba: | Yeah. That’s common though, right? The argument of where it was exactly when it was shot down. Was it legal to shoot it down? Or was it an act of war really?
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| Bryan Strawser: | Right.
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| Bray Wheeler: | Well, and that’s not an uncommon conversation, to your point.
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| Jenn Otremba: | No.
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| Bray Wheeler: | I mean, Russia and the U.S. do that all the time around-
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| Jenn Otremba: | All the time.
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| Bray Wheeler: | … whether or not we’re in each other’s airspace or not.
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| Jenn Otremba: | Yes. Yeah.
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| Bryan Strawser: | Right.
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| Jenn Otremba: | Exactly.
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| Bryan Strawser: | Apparently we were going to attack Iran or retaliate by hitting some missile capabilities. I guess, it’s not really clear what we were allegedly going after.
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| Jenn Otremba: | Right.
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| Bryan Strawser: | Then if you follow the common narrative, the president canceled the attack 10 minutes before it was supposed to go off. But he disputes that. The New York Times and the Washington Post have a tick-tock story from the weekend about kind of the play-by-play of what happened. But again, it’s tough to know who to believe when there’s multiple versions of what’s going on.
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| Jenn Otremba: | Yeah, absolutely. I mean, I’m sure there’s some truth somewhere in between, but we’re not going to have all of the information.
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| Bryan Strawser: | Right.
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| Jenn Otremba: | And we’re not going to have all of the information that the executive branch has in front of them either as we’re kind of making our opinions on the topic.
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| Jenn Otremba: | But I think that this’ll be interesting to continue to watch and to see how this is going to affect really all of us in the United States. But for me, it hits really close to home, understanding I still have friends right now working and operating in the Middle East. So I have a lot of concerns with how this is all going to play out.
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| Bryan Strawser: | So the FAA has banned overflights of Iran for international flights involving American-flagged aircraft. It won’t stop the Europeans and others from doing so, but it will apply to U.S. carriers anyway.
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| Bryan Strawser: | Certainly American companies don’t really operate in Iran because of decades-old sanctions. But we’re everywhere else. I mean, Dubai is one of the world’s big financial centers. It’s right across the Strait of Hormuz from where all of this was going on. That’s a common travel hub for folks going to Asia or elsewhere in the Middle East, to be fair. I mean, Emirates has pretty significant service from the U.S. to there, and then on to other locales like India.
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| Bryan Strawser: | There’s a lot of risk in disrupting the market. I think there’s less issue with oil disruption because of the growth in U.S. oil production over the last decade in North Dakota and elsewhere. But there’s still a lot of risk to the global economy that comes into play here.
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| Jenn Otremba: | Well, and it’s obviously a very volatile situation. So we’re having this conversation of what airspace is what. You know, “We shot your passenger airplane down, because it was in our airspace.” Was it? I mean, that’s pretty scary.
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| Bray Wheeler: | Well, I think to the oil price discussion too, a lot of times historically, this would have been 10 years, global oil prices have shot up. Nobody’s really seeing that at the pump in the U.S. right now,-
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| Bryan Strawser: | Yeah, right.
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| Bray Wheeler: | … because we’ve kind of buffered ourselves a little bit.
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| Bryan Strawser: | Right.
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| Bray Wheeler: | But I think from just the global economy piece. And then somebody did a breakdown, one of the talking heads on one of the cable networks, kind of broke down kind of the impacts of if they went to full-scale escalation and how pretty much the U.S. and its allies pretty much could beat Iran pretty easily based on just U.S.’s power.
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| Bray Wheeler: | But they did kind of an interesting take on kind of playing out how if Iran was to really succeed in this, they would rely on their proxies. Those proxies then carry into Saudi Arabia, they carry into UAE, they carry into Afghanistan,-
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| Bryan Strawser: | Lebanon.
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| Bray Wheeler: | … Iraq, Lebanon, into Israel, the Straits of Hormuz. They’re pretty much going to disrupt that entire region just using their proxy network at pretty much on one order.
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| Bryan Strawser: | That’s been their game plan for the last four decades since the revolution, has been to engage in a proxy campaign against the United States and the Western allies through the ways that you just described. Direct military action has rarely been their forte. I shouldn’t say forte, has been their approach against the United States.
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| Bray Wheeler: | Yeah, because I think it’s-
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| Jenn Otremba: | For a reason.
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| Bryan Strawser: | Well, right.
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| Bray Wheeler: | Yeah.
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| Bryan Strawser: | Yeah.
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| Bray Wheeler: | Because it’s the only way.
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| Bryan Strawser: | Why fight the leviathan head on if you can use proxies to do that?
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| Jenn Otremba: | Yeah, absolutely.
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| Bray Wheeler: | But I think it’s interesting from kind of that business mindset. It’s not just U.S.-Iran or Iran-Iraq kind of tensions, and all of this won’t have anything or maybe it’s just oil or the commodities coming through the Strait. It’s, if you’re doing business anywhere in the Middle East for any reason, you’re at risk and should be thinking about that proxy fight and that ability for those governments and those institutions to hold up against some of that without cracking down or having to pick a side or a lot of other-
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| Bryan Strawser: | Right.
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| Jenn Otremba: | And not just economy for the United States, but really this is a world economy issue.
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| Bryan Strawser: | So definitely an area that businesses should be monitoring and looking, I think, for multiple sources of truth about what’s going on. Because there is certainly a dispute here about what has happened; and of course, both countries will have their own version of what’s going on. So I think look for multiple sources of truth from the news and get a holistic perspective of what’s going on.
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| Jenn Otremba: | Right.
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| Bryan Strawser: | Bray, you want to take us to our last current event for the episode?
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| Bray Wheeler: | Yeah. So this is a little bit of one to watch, because it’s a little bit kind of new breaking story. But it’s out of Turkey. So over the last four or five months, for sure, there’s been some discrepancy in the mayors race in Istanbul. President Erdogan of Turkey, his kind of chosen candidate lost in the election in March. So he called for a recount, which was highly controversial. Then they just did the recount, or they just did a re-vote, and his candidate lost even worse.
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| Bray Wheeler: | So now, he’s having to deal with the fallout of kind of the economic pressure that he’s facing in his country; but then also, his political pressure that’s now amping up, because Istanbul is his home turf. His party’s controlled it for pretty much like the last 25 years or something. So now, he’s having to face kind of this increased pressure against his administration and against his kind of administrative policies.
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| Bryan Strawser: | The Wall Street Journal has a pretty good dive into this from a few days ago. Well, I guess from yesterday, now that I look at the article. I mean, historically, the president of Turkey has gotten what he wants, right?
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| Bray Wheeler: | Mm-hmm (affirmative).
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| Bryan Strawser: | He might get challenged, but usually the various government agencies line up behind what he wants, even though these elections are supposed to be independent, or be not impacting on a national level. Will he accept the mayoral results? If he does, what political powers and authorities will he allow the mayor of Istanbul to keep compared to stripping them?
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| Bray Wheeler: | Well and particularly him, getting what he wants. I mean, that’s kind of has been his MO is, he’s gotten what he wants.
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| Bryan Strawser: | To your point for 25 years.
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| Bray Wheeler: | For over 25 years he’s gotten what he wanted. Now he’s facing some real serious challenges to his ability to control that power.
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| Bryan Strawser: | And I should point out, I mean, his margin of victory in this second race here was 54 to 45. It wasn’t close-
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| Jenn Otremba: | No.
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| Bryan Strawser: | … at all.
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| Bray Wheeler: | No. That’s way outside the margin of error.
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| Jenn Otremba: | Right.
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| Bryan Strawser: | Yeah.
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| Bray Wheeler: | Even for-
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| Bryan Strawser: | Even for what happens there.
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| Bray Wheeler: | … non-U.S. countries-
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| Jenn Otremba: | Yeah.
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| Bray Wheeler: | … who probably don’t poll as much as we do. But I think from kind of that impact and kind of why we’re kind of highlighting that and something to watch is Turkey’s kind of a pretty good bellwether in terms of just stability and kind of the source of truth on the ground for how everything’s feeling both from that connection to Europe and the Middle East. So if there’s some grumbling there, that typically kind of there’s some fallout politically anyway kind of across that region, and makes everybody a little bit more uncertain as that kind of goes along.
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| Bray Wheeler: | Turkey’s also kind of a player for a lot of different U.S.-based companies, global companies. Just its proximity and its geography and its capabilities as a country, it’s definitely something to watch and keep aware of as this kind of plays out. Because they’re afraid to protest either there. They’re not afraid to have this amp up a little bit.
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| Bryan Strawser: | Should point out that the current president, who’s been president for 25 years and will be president until at least 2023, he got into this office having previously been the mayor of Istanbul.
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| Bray Wheeler: | Yes.
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| Bryan Strawser: | That was his launching pad to the presidency and a national scale [inaudible 00:22:04]. Yet now he’s saying that the mayor is just like a piece of shop window decoration. That was his statement yesterday.
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| Jenn Otremba: | Well, I mean of course he is.
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| Bryan Strawser: | Yeah, he’s minimizing-
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| Jenn Otremba: | Right.
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| Bryan Strawser: | … the role of mayor of Istanbul.
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| Jenn Otremba: | Absolutely, yeah.
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| Bryan Strawser: | He did congratulate him on Twitter though.
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| Bray Wheeler: | Well, that’s generous. While he may undercut him.
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| Jenn Otremba: | Yeah.
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| Bryan Strawser: | From a business standpoint, lots of American businesses, lots of global businesses operate in Istanbul. I mean, our previous employer did. We dealt with a number of issues in Istanbul that went on over the years, mostly related to protests and disruption. Can’t think of any instance involving violence or …
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| Bray Wheeler: | No, there was some terrorism stuff. That’s some years back, kind of as Syria was really ramping up,-
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| Jenn Otremba: | Right.
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| Bray Wheeler: | … and kind of some of those connections.
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| Jenn Otremba: | Well, we certainly have extensive experience dealing with world protests and what happens to corporations-
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| Bryan Strawser: | Right.
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| Jenn Otremba: | … in those events.
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| Bryan Strawser: | So Turkey, we view that this is one we need to watch. This is the longterm piece here to watch. Because at some point, there’s going to be some kind of transition, right?
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| Bray Wheeler: | Yeah.
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| Bryan Strawser: | I mean, the current president isn’t going to live or serve for forever.
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| Jenn Otremba: | No.
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| Bray Wheeler: | No, and definitely he’s facing some pretty tough challenges with his economy, and things like that too. This is the most pressure, kind of non-violence, non-full-out protest, pressure that he’s felt. That really throughout the country, people are feeling a little bit uncertain as to the direction he’s taking them in. So he’s going to have to make some choices.
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| Bryan Strawser: | Headwinds are significant.
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| Bray Wheeler: | Yes.
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| Jenn Otremba: | Yes, they are.
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| Bryan Strawser: | Well, that’s it for this newsy edition of the Managing Uncertainty Podcast. Catch our other episode in a few days, where we’ll be talking more in-depth about the protest movement in Hong Kong and what that means for global and U.S. businesses that are operating in Hong Kong and what those longterm impacts might be.
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| Bryan Strawser: | Look forward to having you on the next episode. Thanks.
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