Compliance and risk management are areas that have become more relevant to corporate management due to the increasing number of regulations.
The definition of compliance is complex, but it can be simplified to mean “risk prevention” and “claims avoidance.” Risk management is necessary to protect a corporate entity. Corporate management, whether it is provided directly within a company or by a third party, is obliged to organize day-to-day business operations while acting under applicable laws. Corporate management is responsible for, among other things, setting up functioning processes in order to avoid ignorance of existing rules, recognize breaches of duty, help ensure safety obligations and maintain a flow of information.
If corporate management does not fulfill its supervisory and monitorial obligations carefully and is found culpable according to the law, it will face substantial fines, reputational damage and criminal consequences that the company is generally and that management is personally liable for.
Establishing a compliance system as an early warning tool has become a standard procedure for companies of all sizes. Details on how an efficient compliance system should look depend on company size and structure; corporate management must analyze its entity and its components and establish procedures, policies and rules that are in line with common compliance standards. Corporate management will monitor these processes as well as the regular compliance training of the staff that secure the processes. In order to fulfill these requirements, corporate management may consider bringing in specialized, experienced providers to help propose adequate compliance systems.
The ongoing implementation of these processes improves the quality, transparency and efficiency of corporate security and helps reduce risks and eliminate managerial liability.