Regulatory issues are becoming increasingly important to businesses large and small, with governments and regulators adding new duties and punishments on a regular basis, and stepping up their enforcement activity.
Key areas in which regulation has been introduced or beefed-up in recent years, but where businesses may be unaware of their responsibilities, include competition law, anti-bribery and corruption, and modern slavery.
Failure to comply can lead to significant fines, director disqualification and even imprisonment, as well as major reputational and brand damage.
On the positive side, a robust approach to business ethics issues can enhance your brand and help build customer loyalty.
Competition law prohibits competing businesses from colluding with each other on commercially sensitive issues such as pricing, customers, territories and bids.
Even discussing such issues can break the law. 'Vertical' supply relationships can also cause issues, including where a supplier attempts to restrict a buyer's ability to set (or advertise) prices when selling goods on to its own customers.
The Competition and Markets Authority (CMA) has been particularly active in this area recently, with a particular focus on online sales.
With fines of up to 10% of global group turnover and a maximum criminal penalty of five years in prison, competition law compliance is essential.
A business that has breached competition law may be able to escape punishment by blowing the whistle to the CMA, so it is vital to flush out and deal with any latent liabilities before another party gets to the CMA first.
The Bribery Act 2010 makes it an offence to give or receive a bribe, and creates a corporate offence of failure to prevent an "associated person" bribing someone for your business' benefit.
This includes employees, agents, contractors and even suppliers. The only defence is for the business to show that it had adequate procedures in place to prevent the bribery.
These procedures should identify and mitigate the key risks for the business, particularly any arising from business partners and/or foreign operations.
As with competition law, businesses that have committed a bribery offence may get more lenient treatment if they 'self-report' to the relevant authorities.
Businesses with a turnover of £36 million or more are obliged by the Modern Slavery Act 2015 to publish a statement detailing the steps taken to keep slavery and human trafficking out of their business and supply chain (or stating that no such action has been taken).
Relevant steps include having an anti-slavery/trafficking policy, identifying areas of risk (internally and in the supply chain), providing training, setting KPIs to ensure supplier compliance, and auditing that compliance.
Smaller businesses do not have to publish a statement, but may still need to take their own compliance steps to do business with larger companies.
Here are key steps to help you identify and deal with potential regulatory risks and liabilities:
- Understand your supply chain, and review and update your list of suppliers / sub-contractors;
- Consider where risks might arise in your supply chain for competition (particularly any supplier or customer pricing restraints), bribery and slavery / human trafficking;
- Produce (or refresh) relevant, user-friendly policies and procedures, publicise these to management and staff, and stress the importance of compliance;
- Draft or refresh your Modern Slavery Act statement;
- Deliver training on key risks, compliance steps and procedures to management and staff;
- Put in place a whistle-blowing process and encourage staff to come forward with information on possible regulatory breaches;
- Review your risks regularly to take account of changes in your supply chain or the wider market;
- Seek legal advice as quickly as possible if you think a breach has occurred.