---
title: The VW Emissions Test Debacle - Is There a Lesson for Regulatory Compliance Management?
description: The VW Emissions Test Debacle - Is There a Lesson for Regulatory Compliance Management?
---

[Commentary & Analysis - Compliance & Risks](https://go.adherent.com/commentary-analysis-old)

# [The VW Emissions Test Debacle - Is There a Lesson for Regulatory Compliance Management?](https://go.adherent.com/commentary-analysis-old/the-vw-emissions-test-debacle-is-there-a-lesson-for-regulatory-compliance-management)

 Written by [Karl Dowling](https://go.adherent.com/commentary-analysis-old/author/karl-dowling) | Oct 15, 2015, 12:12:57 PM

<https://go.adherent.com/hubfs/Imported_Blog_Media/Blog-The-VW-Emissions-Test-Debacle-2.jpg>There are many aspects to corporate goals and strategy. There is one corporate goal that is probably the biggest one for every single business on the planet and yet it is rarely, if ever, mentioned in corporate strategy documents and that is: to stay in existence!

Perhaps it is taken as a given, as being implicit in all the other stated goals. It is a given that no-one should ‘bet the company’ on the hope that a particular element of the company’s **compliance management program** won’t lead to potentially catastrophic financial and reputational damage, that could threaten even the future existence of the company.

Goals give rise to strategy, strategy to tactics, actions and follow-through. These actions and follow-through should mean that the day-today running of a company will be in alignment with the corporate goals and strategy of the organization.

How can it happen that the very existence of one of the most long-lived, well-recognized  and respected companies in the world is threatened by a software tweak?

It may be because, in isolation from the potential effects on the larger company, VW engineers were asked to figure out a technical solution to the narrow question of how to get cars through an emissions test. This they achieved - and very successfully, as the cars have been passing the emissions test for years!

The problem was that those who had visibility of the potential consequences of fiddling emissions tests had no sight of the fiddling. Likewise, those tasked with passing the test had no visibility of the potential consequences of the technical solution that was used to pass the tests.

The lesson lies in the transmission of corporate risk strategy and how that maps to the fulfillment of technical regulatory requirements. In any risk planning will there will be some sort of scenario analysis which estimates the probability of occurrence, and combines it with a measure of the severity of consequences of the occurrence, should the scenario play out. This produces an overall **‘risk score’**.

The ***probability*** of being caught fiddling an emissions test was high and ever increasing, as the tester only needs to ‘get lucky’ once, whereas the manufacturer needs to ‘be lucky’ all the time.

The ***consequences*** of being caught were large and also ever increasing, as the penalties and product recall costs increase constantly as non-compliant product continues to be shipped.

The overall risk score was therefore shooting up to virtual certainty, with catastrophic consequences.

**The Lesson:** The trick is to ensure that all policy decisions impacting **regulatory compliance** are made in the context of an understanding of the corporate risk management policy. Where that policy is not clear, opinion needs to be sought from those familiar with the corporate policy and in a position to understand the downsides for the organization resulting from any chosen course of action. Lessons learned from that uncertainty can then be used to improve the policy, and reduce future uncertainty in similar situations.

This requires that lines of approval authority and responsibility map closely to the organization’s risk management process. The company’s compliance policy should unambiguously reflect this.

In a nutshell; management of technical compliance needs to be well connected to management of corporate risk and vice versa.

[View full post](https://go.adherent.com/commentary-analysis-old/the-vw-emissions-test-debacle-is-there-a-lesson-for-regulatory-compliance-management)

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