Ice Cream Sales and Drowning Incidents – A Reminder for Compliance
As ice cream sales increase, so do drowning incidents.
Of course, one does not cause the other – it’s warm weather that drives more people to both eat ice cream and swim, leading to more drownings. This type of spurious correlation is easy enough to spot, but others are not as obvious. Being able to do so is an important part of managing compliance risk.
Take, for instance, the apparent success of Korea’s crackdown on individuals using a corporate entity (and thus claiming a tax benefit) to buy imported luxury cars. After a law took effect this year requiring newly-purchased company cars above KRW 80 million (about $60,000) to sport neon green license plates, sales of Bentley vehicles dropped 77% in the first three months of the year, while those of Rolls-Royce and Porsche vehicles dropped 35% and 23%, respectively.
The approach was seen to work, with transparency being a deterrent. But a further look at the overall facts and circumstances suggests a different story.
Declining sales could have also been the result of devaluing currency, shipping woes, and an unusually cold winter that kept would-be buyers home. In addition, many drivers simply bought the luxury cars ahead of the new law, knowing it was coming. The surge in purchases distorted the year-on-year sales figures, making the drop seem much steeper than when viewed over a longer time horizon.
Indeed, as the year progressed, corporate purchases of luxury and imported cars appeared to rebound, with little difference from prior years in the proportion of company-owned cars amongst overall imported car sales.
A broader view of the data, sprinkled with a little bit of local knowledge, gives a more complete picture – just as it does when looking at risk-related metrics. In the end, those green license plates may prove just as unnecessary as green ice cream.
FCPA Compliance Consultant