SMALL AND MEDIUM-SIZED ENTERPRISES (SMEs)
Compliance is a core component within all organizations regardless of their size.
SMEs frequently fail to develop an effective program as required under the Federal Sentencing Guidelines.
There are misconceptions that SMEs do not face the same compliance risks as larger organizations, and that to implement compliance program the organization must spend a lot of money. These misconceptions are completely inaccurate.
There are simple and affordable means to implement compliance programs in SMEs, including the combination of leadership commitment to do the right thing and to take effective management steps.
If its leaders are well educated on what is needed, a SME can implement an effective compliance program with just a small investment.
A compliance program allows SMEs to centralize, prioritize, manage, and control risks effectively.
An effective compliance strategy ensures SMEs are partnering with trustworthy third parties. Doing business with reliable third parties helps a company synchronize its business, legal, and compliance concerns.
SMEs with a compliance program in place make their clients feel positive about the organizations’ integrity.
SMEs have limited resources and it is typical for SMEs to have only one person in the organization named as the compliance “department.” This person needs a compliance checklist to help keep track of and organize compliance activities. The checklist ensures that all required tasks are completed, and nothing was missed. Moreover, this person will need appropriate training in order to communicate and monitor the program throughout the organization.
Like large and global companies, SMEs also need to ensure they are not putting their assets and their customers/clients at risk. For that reason, there are critical matters that SMEs must pay special attention to:
Data and Privacy Protection – Companies must ensure protection over their client/ customer assets and data.
Financial Regulations – It has become increasingly common for investors to demand that SMEs endorse corporate responsibility provisions. SMEs must educate their employees on what constitutes a violation and how to report it.
Anti-Corruption – As the U.S. Department of Justice is vigilant about punishing companies that violate the Foreign Corrupt Practices Act (“FCPA”) and holding them accountable even if a third-party was ultimately responsible. SMEs are increasingly asked by their clients to demonstrate their established code of conduct and ethics.
How to prevent violations or to detect red flags?
- Creating, establishing and circulating a code of conduct and ethics
- Training employees in compliance matters awareness
- Implementing and enforcing internal controls and segregation of duties
- Monitoring job rotation and other internal systems…
Why have a compliance and ethics program?
- To prevent violations, fines, and prison to individuals who violate the law
- To prevent high litigation costs
- To receive more lenient treatment, avoid liability, and fight punitive damage claims
- To prevent reputational damage
- To be a trustworthy, safe, and desirable business partner (especially if you seek large and international clients)
SMEs pay a high price for a lack of compliance programs, ethics, and a failure to detect red flags.
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