Compliance violations can have a detrimental effect on small and medium-sized companies. This article explores how you can protect yourself from scandals and sanctions.
Compliance is mandatory, not optional
Violations of the law such as bribery, money laundering or fraud have serious consequences. Breaches not only damage the company’s reputation, but can also lead to heavy fines or even imprisonment. If an infringement occurs, CEOs, managing directors and board members are liable if they have not implemented a compliance system or do not monitor it. This affects small and medium-sized companies as well as the big players.
Whistleblower systems protect every company
Whistleblowing has become an increasingly important subject in Europe in recent years, especially following the EU Directive on whistleblower protection. This Directive obliges employers to introduce a reporting channel through which employees and third parties can confidentially report violations. These include tax fraud, money laundering and data protection breaches.
The Directive applies to companies with 50 or more employees. Those who opt for a whistleblowing system early on not only fulfil compliance requirements, but also increase their appeal to banks, investors, employees and business partners.
Four tips for SMEs taking their first steps towards improving compliance:
Starting is always hard. With these four simple tips, your company can set the right course for better compliance.
- Define at least one specific person in the company who will deal with compliance issues. At the beginning this could be someone on the management board or in the legal or human resources department. Some companies establish a position responsible for compliance from the offset. It is important that you communicate this new position to all employees and explain their role.
- Conduct a risk assessment to identify the most significant risks in the company. Then develop measures to mitigate the most significant risks. You may not be able to eliminate all risks at once but it is important to draw up a roadmap with the next steps.
- Provide your employees with a channel where they can report any wrongdoing confidentially (see whistleblowing system above).
- Promote an ethical corporate culture. To do this, involve the human resources department from the outset and provide regular training for employees and managers.