DEI Risk Audits: Mitigate Risks and Protect Values

With the recent Trump administration executive orders and actions targeting Diversity, Equity, and Inclusion (DEI) programs, corporate DEI programs are under heightened scrutiny like never before. While these actions have not yet changed federal anti-discrimination laws, the Trump administration intends to prioritize investigations and litigation against companies it believes operate “illegal” DEI programs that violate federal anti-discrimination law. This risk is even more pronounced for federal contractors and grantees who now face potential False Claims Act (FCA) liability when they certify that they do not operate “illegal” DEI programs and comply with federal anti-discrimination laws. The actions by the new administration also have intensified attacks on corporate DEI programs from anti-DEI activists and Republican state attorneys general.

At the same time, companies that eliminate DEI programs or excessively curtail them can create legal, business, and reputational risks. These risks include an increased likelihood of traditional discrimination claims, possible consumer backlash or boycotts from certain groups, and diminished ability to attract and retain talent. To mitigate risk while tailoring DEI programs to company preferences and risk tolerances, we recommend conducting privileged DEI risk audits.

Summary of DEI Risk Audits

We help companies navigate these difficult issues through our privileged DEI risk audits. By proactively reviewing our clients’ DEI programs, policies, and communications, we provide clients with actionable intelligence to help appropriately mitigate risk while upholding their corporate values and reputations. Our DEI risk assessments help companies:

• Assess their DEI and anti-bias programs, policies, and communications for actual and potential risks, considering the current political environment.
• Develop strategies and practical recommendations to appropriately mitigate risks associated with DEI programs and communications while upholding corporate values and objectives.
• Provide federal contractors and grantees with legal assessments of their DEI programs to support their certifications that they do not operate any “illegal” DEI programs that could help defend FCA and qui tam whistleblower claims.
• Defend shareholder derivative actions by bolstering officers’ and directors’ business judgment that the company’s DEI programs are in shareholders’ interests.

Scope of DEI Risk Audits

The scope of DEI risk assessments can vary based on a company’s practices, preferences, and objectives, but assessments typically proceed with the following steps:

Step 1 – Establish Privilege: As these audits mitigate risk in anticipation of litigation, they are protected from disclosure by the attorney-client privilege as well as the attorney work product doctrine. We work with our clients to properly document these privileges and establish protocols to maintain privileges throughout the audit.

Step 2 – Inventory: We assist clients with conducting holistic inventories of their DEI programs, policies, and communications, including collecting information on DEI programs related to employment, suppliers/vendors, customers/clients, and corporate philanthropy. The audit can be appropriately scoped to certain areas to minimize burden and costs based on client preferences and objectives.

Step 3 – Assess Risks: Our cross-practice team of experienced professionals on our DEI Strategy + Defense Task Force review DEI programs, policies, and communications for actual legal risks and create risk profiles of legally permissible DEI programs based on risk level in light of the current environment.

Step 4 – Report Key Findings and Actionable Recommendations: We provide clients with key findings from the assessment and tangible recommended action steps. These findings and recommendations aim to give clients actionable intelligence to inform their DEI strategies based on their preferences and risk tolerances.

Step 5 – Risk Mitigation and Implementation: We create bespoke strategies for clients to tailor their DEI programs to appropriately mitigate risk while avoiding overcorrecting DEI programs in a manner that could invite legal, business, or reputational risks. We also offer trainings for company executives, managers, legal, HR, and compliance teams and assist with creating systems for routine and periodic reviews of DEI programs and communications.