United States: Dealing With An Investigation: Planning Ahead

Global Crisis Management Series: This post is part 3 in a series concerning topics further elaborated on in Cleary Gottlieb's Global Crisis Management Handbook—a desk reference for spotting issues and avoiding common mistakes when faced with a crisis. The current version is available here.

The beginning stages of an investigation are often the most critical. At the outset of any investigation, information is often limited and events are unfolding quickly. As a result, it is important to develop a clear and adaptable plan that is appropriately scoped, identifies the right team and sets forth the steps that will be taken as part of the investigation. Having a written plan in place is crucial to making sure that all relevant stakeholders are on the same page about what activities the investigation will include. It also ensures that the investigation is managed effectively and is guided by a clear set of objectives.

Initial Fact-Gathering

A well-planned investigation has two early milestones: first, identifying and preserving relevant information and second, setting an appropriate scope. To achieve those milestones, the investigative team should quickly assess what is known about the issues and how the company became aware of them. The first major step to fact-finding is making sure that any records relating to the investigation are properly retained and can be accessed. Early scoping interviews and document requests can aid the investigative team in identifying key custodians and locating potential sources of information. As discussed below, this fact-gathering exercise can also assist the investigative team in defining a suitably narrowed scope that focuses on the main issues.

The information obtained from this initial fact-gathering should be incorporated into the investigation plan, along with the investigation's objectives. In addition to fact-finding, the investigative team should determine what these goals are, whether they include drafting a report, cooperating with regulatory authorities, identifying legal claims and exposure or developing remedial measures.

In many ways, the plan will be a "living document" that will develop as the various investigative puzzle pieces start to fall into place. The investigative team should take care to regularly refer back to and update this plan throughout the investigation and, at various intervals, should reassess whether the investigation has stayed in line with its set goals or whether these goals themselves may have evolved over the course of the investigation.

Assess and Reassess the Scope

A great deal of effort should be devoted towards defining the scope of the investigation, which will often depend on its triggering event. First, an appropriately-defined scope will set the boundaries of the investigation, avoiding, on the one hand, any wasteful and unnecessary mission creep that can derail the investigation and obstruct it from meeting its goals, and ensuring, on the other hand, that there is sufficiently robust analysis and factual development such that the investigation will be viewed credibly by stakeholders and the authorities. Second, a well-defined scope will streamline fact-finding in a way that is organized and duly considers the relevance of information, even as new facts continue to emerge.

Ultimately, setting the scope is a way of organizing and setting priorities within what is always the primary goal of the investigation: to establish the underlying facts. A well-defined scope creates a process to ensure that new issues are treated in a thoughtful manner—they are neither reflexively added nor cast aside as part of the investigation's fact-finding.

Composing the Team

Planning ahead also means determining who will be directing and who will be conducting the investigation. Whether the investigation is overseen by management, the board or a board committee, it is critical to make this decision at the outset and to ensure it has the buy-in of all relevant stakeholders in order to avoid having to revisit the investigation or have its results discredited. This decision should take into account a number of considerations, including whether management has a conflict of interest and whether the company's auditors or regulatory authorities would expect an independent investigation. There are a number of instances where having management lead the investigation is not only appropriate, but makes the best sense in light of management's superior understanding of the company and its operations.

In addition to identifying who will direct the investigation, it is also important to determine who will conduct the investigation, including whether to rely on in-house or outside counsel. Further, the investigative team should assess what subject matter expertise is necessary to achieve its objectives—perhaps the investigation involves a complex market or product, or knowledge of a particular industry—and whether a forensic accountant or other specialized assistance is needed. Planning ahead and involving such experts early on if necessary will better define the contours of the investigation. Generally speaking, in deciding on the right advisors, it is critical to consider their credibility with relevant stakeholders and their ability to conduct the investigation in the time and manner contemplated by the investigation plan. It is equally important to consider how to engage advisors in a manner that best preserves the privilege a company may assert over the investigation and its results.

Taking early steps to carefully compose the team and establish lines of communication will enable proper oversight of the investigation. From the outset, the investigative team should establish a communication plan identifying internal and external stakeholders and ensuring that relevant decision makers are updated on developments as needed. The investigative teams should also manage the investigation plan in a manner that keeps track of timing, budgeting and the achievement of milestones. The investigation's scope, plan and goals are all flexible products—they are malleable and will inevitably evolve as new facts are developed. The key to conducting a thorough, credible and tailored investigation is ensuring that such a process has contemplated the need for such flexibility while allowing the investigative team to have all tools at its disposal for maintaining control of fact development, budgets and timelines.

Plan to Be Dynamic and Adaptable

As noted above, the investigation plan will be the first point of reference for the investigative team and company stakeholders alike. Each will use it to understand the goals of the investigation and the steps for achieving them. The most effective plan contains a budget and timeline that allows the investigative team to maintain an overall focus on the issues at hand while allowing flexibility for delays and unforeseen changes. Newly available information, or conversely, an inability to access certain information, may reroute an investigation. Embedding flexibility into the investigation plan can help guard against redundancy or misdirection. Despite even the greatest efforts to prepare a linear investigation, the steps in an investigation will often overlap and cycle back several times before the investigation is completed. Knowing and planning for this ahead of time will result in a smoother process for all participants.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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