Why do you need compliance?
Previously, we pointed out that compliance is the system of measures that the company introduces to comply with the laws and business ethics. But why do you need this?
Firstly, it is a way of reducing risks. For example, occupational safety compliance imposes on organizations the obligation to introduce fire safety regulations. If there are such regulations:
- a) risks of fines and administrative liability are eliminated;
- b) risks of criminal prosecution of the CEO are eliminated;
- c) risks of fires or casualties in case of a fire are reduced;
Secondly, it is a method of allocating responsibility within the company. If there is a lack of administration in certain aspects of the company’s operations, all responsibility rests with the CEO or a person, who gives instructions. By introducing the compliance system, the company imposes responsibility on those officers, who perform potentially wrongful acts, whereby subsidiary responsibility of the management can be reduced.
Thirdly, this is a legal requirement. So far, literally it only refers to anti-trust compliance, but in general companies are required to take measures to prevent violations in various business areas (this will be further revealed in our future publications).
Fourthly, in some situations, it is required for listing on a stock exchange.
Fifthly, it reinforces trust in the company and its transparency. For example, once in our practice the customer succeeded in finalizing negotiations on more acceptable terms with major transnational creditors and avert most claims by implementing the compliance system.
Sixthly, compliance is the simplest way to do everything right. To comply with the minimum legal requirements, to operate transparently, to pay taxes and not worry about blockage of accounts and accountability.
Seventhly, the last but not the least, compliance is indicative of general cultural level of the company, whether it looks for small loopholes and swindling, deceives its employees and clients, or whether it is a decent member of the civil society. It is especially conspicuous in large companies.
At present, compliance is the same as foreign top managers in the 1990s in Russia. It not only shows that the company can afford to observe the laws, but that the company wishes to become a part of the civilized business and has high quality management tools. Those companies which plan to work with foreign corporations need compliance as well. In some jurisdictions, in particular in Europe and the USA, companies are forbidden to have foreign counterparties without incorporated compliance systems.
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