There’s no “one-size-fits-all” solution to corporate due diligence, so you have to look for the right fit for your company.
Ignorance of the law is rarely a defence in a court of law. That’s just as true in business as it is in your personal life. But while it’s usually fairly easy to keep yourself out of legal trouble, it can be a lot harder to stay on the right side of the law in business.
Laws, regulations, certification requirements change all the time, and your business needs to adapt and add policies and procedures to ensure that you change with the times. That’s corporate compliance in a nutshell, but while it sounds simple, it’s actually much more complex than one might think.
No “One Size Fits All” Solution
One of the major stumbling blocks for companies when it comes to corporate compliance is the lack of a one size fits all solution.
Because there are so many elements to any compliance program, based on your industry, your state, and a host of other factors, you really need to create a tailored system that is unique to your company. There are professionals who can help you to create an effective compliance program if you are struggling, so that you have a solid foundation to work from.
This can be even tougher when your company does business in emerging markets, where the local legal frameworks may differ significantly from US laws.
Some Universal Factors
Even though your corporate compliance is often driven by what you do and where you do it, there are a few basics that all programs should incorporate:
- Leadership involvement. This is the most important step. Without a complete leadership buy-in, corporate compliance programs almost invariably fail. Leaders might not draft the actual policies, but they need to ensure that they are adopted universally and applied absolutely.
- Properly trained staff. While you might not have a dedicated compliance official in your business, it’s important that department managers understand what their role in compliance is, and what their department needs to do to ensure companywide success.
- A list of state and federal laws governing your industry and company, and policies that outline how your company will comply.
- A list of certifications and accreditations required to practice in your industry, if required. This may include things as simple as maintaining a current business license for the city or cities you operate in.
- Documented policies that outline your business ethics, what constitutes corruption, and how it is handled in your business.
- Any other documented policies relating to human rights, legal compliance, service level standards, and any other regulations that affect your company.
The smaller your company is, the less complex your compliance program is likely to be, but companies of all sizes should consider having their policies and procedures documented. It’s always easier to remember what you need to do when it’s written down!
When Buying a Company
When you are considering buying or merging with another company, it’s always a good idea to include some investigation into their corporate compliance program when conducting your due diligence, too.
After all, companies that don’t have a good handle on complying with state and federal laws, and good, solid internal policies, may well come with all sorts of surprises that you weren’t expecting, and that aren’t likely to be pleasant. No one wants to inherit legal troubles based on someone else’s lack of good corporate governance.