Brion Nazzaro With Association of Certified Commercial Cannabis Experts

Intro: [00:00:02] Broadcasting live from the Business RadioX Studios in Atlanta, Georgia. It’s time for association leadership radio. Now here’s your host

Lee Kantor: [00:00:15] Lee Kantor here, another episode of Association Leadership Radio, and this is going to be a fun one. Today on the show, we have Brion Nazzaro with the Association of Certified Commercial Cannabis Experts. Welcome, Brion.

Brion Nazzaro: [00:00:28] Hi, Lee. Happy to be here.

Lee Kantor: [00:00:29] Thanks. Well, I’m excited to learn what you’re up to before we get started. Can you tell us a little bit about the Association of Certified Commercial Cannabis Experts? How are you serving, folks?

Brion Nazzaro: [00:00:40] Sure. We’re a membership driven association. We really focus in on our professional compliance and risk management experts out there in the cannabis industry. We’re trying to provide them the information they need curated in the way that they need it, provide the resources that they can implement their programs at their specific operations, and give them a way to understand how to enhance these programs over time without having to redo everything that they’ve done before and come out with a really efficient and effective way to help commercial cannabis businesses sell their products and remain compliant.

Lee Kantor: [00:01:18] Now, can you educate the listener a little bit about kind of where we’re at from the history of the industry? It’s relatively new in America, and you know, it’s going through. It’s a variety of, I guess, growing pains. Can you talk about where we’re at and where you see it going in the near future?

Brion Nazzaro: [00:01:38] Sure, in 2021, we had about 16 to 20 billion dollars worth of cannabis product sales. We have roughly 18 states that allow recreational and thirty six that allow some sort of medical marijuana. When I use the word state just realized there are territories out there like D.C. or Puerto Rico that I’m lumping into this and it’s really started to go across the nation. I mean, we’re also seeing it internationally. Obviously, Canada to the North has done a lot of work to make it federally legal. You have a lot of medicinal use over in Europe, specifically in Germany and a lot of production around the rest of the world as people are starting to see the global market for cannabis and the real consumer demand for this in in the markets that it’s legal in. It has had a checkered past. I mean, it kind of reminds me what I thought of as prohibition of alcohol before where it was still going on. If was still pretty strong in the culture and when prohibition ended, you had a lot of people trying to figure out how to make their way in the licensed market. And you really had a lot more controls going on. You know, I remember back in history class where they were like, Yeah, there was gin blindness and moonshine was was hurting people. Well, that’s the reason to go into a regulated market is there are government officials that are trying to make sure that the safety and the soundness of the market is maintained so that that consumers can rely on the products that they’re about to buy. So we’ve had a lot of improvements in the overall industry. We’ve had a lot of improvements in how culturally the consumers are looking at the cannabis product and realizing that even if that’s not a choice, that they want to make their medicinal applications, their recreational applications, and really, it’s just allowing people that want to have access to this cannabis product can find a safe and sound market that can serve that need.

Lee Kantor: [00:03:41] Now is the is prohibition. Is that a fair kind of a data point to use as the path that it went on as the path that that cannabis is going to go on, like when they when prohibition ended and people can buy alcohol, did they have the same kind of banking issues and financial challenges that the cannabis companies are struggling with?

Brion Nazzaro: [00:04:08] I think that’s an interesting issue. I doubt it because anti-money laundering is the main regulation that really keeps banks from financial institutions, from serving this business. That’s really an 80s construct. And so prohibition was before that. I imagine there were some questions and some stigmas, but it probably wasn’t coming from the same angles that it’s coming from today. Really, what what we’ve seen is that the government looks at certain entity types like financial institutions as gatekeepers to the overall financial services market. And the obligation when you get a charter or a license to operate in financial services is to make sure that illicit activity doesn’t run through there. You can’t help organized crime essentially, right? And so that’s really what. Causing the banking issue now, I’m sure there was probably a lot of other issues like I’m sure there were seizures, I’m sure there was other things where once something becomes legal doesn’t mean that everybody got the message that day. You know, I imagine law enforcement did did take legitimate seizures of alcohol. I’m hypothesizing at this point, but it would seem to make sense because it’s hard to tell everybody, OK, this thing that was illegal. Here’s how it can be legal. But there are still many ways that it would be illegal, and it’s very confusing for those that are enforcing the laws. And I think that’s where a lot of crossover is is happening today, as it would have been in the past.

Lee Kantor: [00:05:39] And isn’t this where kind of the value of your organization really comes to the fore is that somebody has to stay on top of this because it’s a moving target, it’s changing. It seems like on a regular basis and somebody has to kind of be the somebody who understands this and the ins and outs and the risks and the opportunities somebody has to kind of watch the back of the people that are are doing the work kind of in the local markets.

Brion Nazzaro: [00:06:07] Absolutely. It’s risk and reward. I mean, it really has to go together because you’re not always trying to mitigate risk if it’s really going to affect the reward that you want and you’re not always trying to to take all the reward at the cost of all the risk. And so the way that I would push this out further is you’ve got a great point that things are changing and that’s what you want from compliance and risk people. You don’t want us just beating the same issue over and over again because essentially it’s diminishing returns. You know, at some point, that issue is probably as mitigated as it needs to be. It’s as efficiently and effectively managed by the business. Start looking at the other things that hurt the safety and soundness of licensed cannabis market or the risks that are are likely to put your business at risk and focus on those because that will drive value into the business. Compliance and risk don’t survive if the business doesn’t survive. So you want these these qualified risk and compliance people to understand how to balance business objectives with risk mitigation and reward, or you’re going to get a one sided outcome.

Lee Kantor: [00:07:15] Now, some of the challenges that not only are you dealing with kind of the local issues, but you also have federal issues that it’s just difficult to get a clear understanding of where anybody stands in any given moment.

Brion Nazzaro: [00:07:31] There’s all sorts of issues and look in highly regulated industries. That’s what they really mean. It’s so easy to cross the line and have noncompliance or misconduct as essentially a legal activity that happens because the business is so highly regulated and the outputs are so highly regulated. A mistake can actually cause you larger issues, then less regulated industries. And so within this, what you’re really trying to find is somebody that can help the management committee and the investors and the regulators understand that the business has an intent to comply because that’s the first step when you’re really looking at compliance and risk mitigation. I would say almost all owners and investors want to know, Well, how did you reduce my criminal exposure? I wouldn’t like to go to jail, and that does happen occasionally in in highly regulated industries, because that’s how they keep the industries in line is criminal and civil and administrative exposures. And so you really want this qualified person that, yes, understands the risks, but truly understands those drivers of criminal, civil, administrative and reputational exposure so that no matter what the risk is, they can manage those aspects for you and tell you confidently why either it’s mitigated to a certain level or eliminated so that you can go focus in on your business objectives, grow your business, have that better product really compete in the market that you joined? You didn’t join a compliance and risk market. You joined a cannabis products market that’s probably where you want to compete.

Lee Kantor: [00:09:07] Right. And and nobody would. I would think that when they signed up for this, they weren’t saying, Hey, let’s figure out ways to beat the system. They were just trying to take advantage of an opportunity and they they want to play by the rules. It just that it just gets to me. It’s very confusing and there’s a lot of inadvertent mistakes that could be really painful.

Brion Nazzaro: [00:09:31] And that’s the problem. They’re not necessarily inadvertent, but they’re also not meaning to be illegal. Look, there’s a lot of energy as an entrepreneur. I mean, every day you have to put your mind towards something, and when you have an exciting avenue, it’s hard to see all the other things around you, which is why you’re supposed to have this group of trusted advisors. We normally talk about them as the C-suite or executive management or senior management, but it’s this group that’s that’s supposed to keep you from getting tunnel vision and pull you back and be like, Look, the idea overall probably has legs, but we’re going to have to trim and shape different parts of this to make sure that it fits within the legal construct of what in this case, a cannabis product or cannabis service can be. And I think that’s that’s the the big thing that people miss. The point of the compliance and risk officer is to help everybody else see, look, where is there a great idea that has merit in the marketplace and where do you step over the line and you might be adding criminal or civil exposure to your business? And that can actually destroy a lot of value in all the other things that you’ve done. This one product or is one service brings down the rest of your business. Was it really worth doing that? And that’s where you need that trusted advisor to come back and say, Look, you can see why this might be across the line, and here are the options that we might have to bring it back inside the bounds, right?

Lee Kantor: [00:10:55] And constraints and parameters are part of every business. I mean, everybody has to deal with it to some extent. Obviously, there’s the cannabis industry has its own unique challenges, but there’s there’s always constraints, not like no one can do anything they want to do just because they want to do it. So I mean, that’s just part of being an entrepreneur now for you. You know, in this organization, what are some of the challenges you have of elevating these issues to the fore and getting people to become members and support the work that you’re doing?

Brion Nazzaro: [00:11:28] A lot of it comes around what the cannabis industry really is to to to to the overall environment of business. We don’t normally get highly regulated industries that enter the market and in their 10th year are generating $20 billion of revenue. I mean, that’s just huge numbers to put up on the board, and we don’t we haven’t had a lot of new entries to highly regulated. And the problem with that is that it goes back to that first problem we were talking about banking, right? Banking expects that highly regulated industries have a risk based approach, that they’ve matured these processes and can show how they’re managing their risk so that they don’t put the financial services at risk. But that’s because most highly regulated industries have been around for 30 plus years. They’ve had time to mature this, you know, companies that are just coming online today or just been around for three years or five years or didn’t know the expectations 10 years ago, you just can’t hold them to the same level you’re expecting. For these companies to mature over time, but that is a hard story to tell, to executive management, to tell the regulators, to tell to a lot of third parties as you’re serving this emerging industry that, hey, we’re not going to have the same controls as arms dealers, as oil and gas, as pharmaceuticals, food manufacturing, as go down the list because we just haven’t had the time. But the nice thing is it won’t take us 30 years to get there because we do know how to identify the best practices, risk management that go across industries.

Brion Nazzaro: [00:13:01] We do know what the risk management frameworks are for these other highly regulated critical business relationships that are needed in cannabis. And so we can start talking to them and saying, OK, well, here’s the plan. Here’s how we prioritize it, and here’s how you know that. We’ve at least reduced our criminal exposure or eliminated to the point that’s reasonable. And here’s how we’re working on our civil exposure. And here’s how you can trust that if we find something non-compliant or illicit, we’re not shoving it under the mat. We’re going to deal with it and we’re going to deal with it in a way that is recognized by the government generally comes down to deferred prosecution. You’re trying to show that when you have an issue that could materially impact the safety or soundness of the licensed cannabis market, that you’re not just coming back and saying, Well, I’ll pay people off to not talk about it. You’re coming back and saying, Look, I’m going to remediate the issue, try and make it as low impact as possible on the impacted parties. And then going forward, this is how I’m going to change my practices to make sure that issues like this don’t occur or occur less frequently and at a lower impact. And that’s really what what is expected in highly regulated industries.

Lee Kantor: [00:14:07] So now who should become a member of your association?

Brion Nazzaro: [00:14:11] Right. We mainly focus in on compliance and risk professionals. So from the entry level all the way up to the board level, the lead risk or compliance director at a company that said we still work with the overall entities through alliance memberships, so we focus in on the individual members for risk and compliance specific. There are some needs for CEOs or CEOs to understand risk operations. They will also join. And then on the company side, if your brand is trying to show their their strong risk culture and say, this is why you should allow us to expand into future markets and be larger than most of our competition, we work with a lot of companies like that where they need that public acknowledgment that they are actually intending to comply. And it’s not just words. There’s actual practices that are being put in place. There’s actual formalization. And then the third category is the vendors and regulators, those involved in risk and compliance management in the commercial cannabis industry, but not plant touching. They also need to understand what are the risks that we should expect operators to manage. What are the risks most likely to affect these businesses? What are the best practices that we should look for in place that these operators so that we don’t have ridiculous requests like give us everything about you and we want a picture of you on your honeymoon because we need to know you’re married to whoever you’re married to. I mean, it gets really hard out there when everybody’s trying to make up what the risks are that you’re exposed to and then figure out what they could ask for. You want somebody to help guide you and say, Look, these are kind of the standard documentations. If you have a risk that you’re otherwise trying to manage. Sure, you might need to do something, Nick, but you should ask yourself, is that really a risk that is going to emanate from your commercial cannabis business? Clients, customers?

Lee Kantor: [00:16:02] Now those are the people that should join when they do join. What are some of the benefits of the membership? Obviously, they’re getting a lot of thought leadership. They’re getting a lot of interacting with other people, kind of fighting this same fight. But there are some specific benefits of becoming a member.

Brion Nazzaro: [00:16:21] Yeah, it’s about having the right tool chest and risking compliance fight fight with their mind. You wouldn’t want a carpenter to go out there professional carpenter and show up without a toolbox. You know you don’t want them screwing you and screws with their fingers. It’s the same thing for compliance and risk professionals. They need these tools. So policies, procedures, practices, ways to conceptualize what the risks are so they can explain it to others. And the value of an association is we curate the information that comes across, and we also make it so that our resources and our tools can interact with each other and build on top of each other so that your compliance and risk person is really focusing in on managing the risks specific to your business. Not trying to find the information that they’re looking for just through Google or go get a policy out of the pharmaceutical and trying to adopt it to their their business. You know, we’ve done a lot of that legwork for them so that it integrates well and that there’s a way that they can demonstrate the efficiency and effectiveness of the risk management practices and also show that if noncompliance. Misconduct happens that there’s a reasonable way that the business was trying to manage this, and that is part of the defense, you know, when you get in trouble. It really comes down to fines and penalties. You’re almost always going to get the fine because something went wrong. But the penalty can be mitigated pretty materially because if you’ve already done everything the government’s expecting you to do. Then why should they penalize you further than just saying, Yeah, you did do the bad thing? Here’s the fine. There’s no reason to go further to that penalty phase. So really just setting it up so that this professional has the tools that they need, the tools work together, it becomes efficient and effective, and it actually has that outcome that they’re looking for should something go go wrong.

Lee Kantor: [00:18:13] Now, as part of your offering some sort of certification where people become certified in this specialty?

Brion Nazzaro: [00:18:20] Absolutely. So part of any deferred prosecution standard that we’re aware of around the world is that especially in compliance and risk, the business can’t just say we intend not to break the law. Every business would say that if that was the defense, what you have to show is that you had a reasonably qualified person who managed this aspect of the business desire from a day to day perspective. Most of these these deferred prosecution standards call out for this qualification, but they don’t say what it is. And so you can you can show it through a few different ways. You might have history or experience. You might be able to lean on maybe your accounting, auditing background or your legal background. But but risk management and compliance is open to all. There’s not a specific standard for it. So if you’re coming from a different educational background or a different history, and what you need to be able to show is that you understand what this industry is, what the what the risks are specific to the commercial cannabis industry and what the risks are specific to your business. And you have to show that you had a reasonable concept methodology to bring this all together so that if something goes wrong, people could look at it and say, you know, there was actually a lot of good things that this business was doing. They fixed, you know, eight to 10 things that could have been bigger risks in the future, and they just hadn’t had time to prioritize this risk yet. They’re on the right track. We can rely on them to understand how to manage this in the future because this person is qualified to lead the company and be that trusted advisor among executive management to to manage the risk. And that’s what the qualification of the certification is really about is you have to be able to demonstrate that you weren’t just somebody, but you’re the right somebody to help the company understand what they need to manage.

Lee Kantor: [00:20:10] Now, if somebody wants to learn more or get involved with the association, is there a website

Brion Nazzaro: [00:20:16] There is ace dot org? It’s a c c c org. So three C’s and we have a lot of our information up there. Please feel free to contact us through any of the web forms or reach out to myself at Brian D-R.I. Own at ace org.

Lee Kantor: [00:20:35] Good stuff. Well, Brian, congratulations on all the success you’re doing. Important work and we appreciate you. Thank you. All right, this is Lee Kantor. We’ll see, y’all next time on association leadership radio.