Traditionally it has always been difficult to build a business case for compliance, given most compliance programs in one way or another act as a hurdle to business continuity.
However the paradox to this is the impact non-compliance has on your key stakeholders, and subsequent impact posed by this notion.
Most companies and businesses have all or most of the following stakeholders:
- Directors
- Employees
- Shareholders
- Members
- Partners
- Community
- Consumers
We have categorised these stakeholder classes and the impact compliance has on each of them:
Directors
Trends in modern legislation certainly depict increased personal responsibility of company officers. For many decades business and company structures were cleverly designed to protect company officers through the use of legal veils which restricted regulation sanctions to the corporation and limited consequences upon directors charged with ensuring the company or business met its legal obligations.
This shift is no more evident than modern work, health and safety legislation, which poses strict due diligence obligations on company officers; responsibilities they can not delegate.
Such a trend has also found itself in other modern legislation effectively piercing previous legal veil protections, whereby company officers carry the burden of compliance and increasing their vicarious liability in the methods companies and businesses meet their compliance obligations.
Employees
For most businesses and companies, there is a heavy reliance on your employees in the methods of which compliance programs are maintained.
The role of an employee in compliance most certainly commands a strong program of policies and procedures, which outline the responsibilities of employees in your business pathway, to ensure you are meeting your legislative requirements.
Should you fail to build policies and procedures detailing an employee’s obligations, it is almost certain the continuity of compliance will be broken.
This is because it is human nature in the absence of policies, procedures and adequate instruction, to do things the easiest way possible. Such a method of delivery of your products and services guarantees your compliance obligations will not be met.
Policies and procedures are fundamental to any compliance program and need equally to be supported with performance management of employees responsible.
Shareholders
The impact of non-compliance on a shareholder has significant consequences. The interests of a company or business shareholder are ultimately underwritten by the value of the company or business.
Sanctions imposed by regulators, courts or judiciaries have never been known for their ability to add to the value of businesses and companies, however, the impact of such sanctions is not normally something you would include in a prospectus to future investors.
If such a sanction interrupts the methods which you undertake business, most likely this will devalue a shareholders interest.
Members
Similar to shareholders, a company’s ability to deliver services to its members is determined by its capacity to make money from its operations.
Given compliance programs are not normally known for their ability to increase revenue streams, and revenue is relied on by companies and businesses to provide facilities for their members, non-compliance poses a risk to the ability to provide such services.
Partners
Most companies and businesses rely on partners such as commercial partners, suppliers and service providers. Each of these classes works hard to build personal and/or business brands and normally imply that non-compliance by one of their partners has the ability to compromise the integrity of their brand they have worked hard to build.
Such risk for companies and businesses occurs when commercial partners, suppliers and service providers elect to not do business with you, for fear the relationship may do damage to their identity.
This may then affect the way in which you deliver products and services to your customers and pave the way for diminishing revenue.
Community
Most legislation is normally passed by governments in response to community sentiment.
When the sentiment towards a particular issue is negative the Government normally responds with legislation to curb community concern.
A perfect example of a government responding to poor community sentiment occurred in NSW in 2014, with the introduction of the lockout laws for licensed premises in the City of Sydney and Kings Cross precinct, a response to the increase in alcohol-related violence.
Rest assured any industry who reflects poorly on their compliance obligations in cooperation with negative community sentiment, normally results in more restrictive legislation being introduced.
Consumers
Consumers don’t normally care whether you are a compliant business or not unless it directly correlates with a social value they have attached themselves to, like the impact your use of plastic bags has on the environment.
Essentially consumers want to do business with you at the best quality for the best price. Your compliance program will determine your ability to be able to meet this need of best quality at the best price.
Best quality is determined on the integrity of your partnerships and your ability for you and your partners to compliment your brands.
When it comes to compliance, the best price for consumers can only come from your ability to execute your compliance programs the cheapest way possible. The cheapest way possible can only occur when you successfully plan to hit the ‘sweet spot of compliance’, that is the spot where you are neither non-compliant or over compliant.
