Good compliance reduces corporate exposure to enforcement actions and underpins value
Throughout history, trading entities have been targets for and victims of corrupt behaviour and fraud. In today’s world, one of the greatest risks to businesses may be a lack of awareness of their exposure to fraud and corruption. But how do corporates identify where their greatest exposure lies and assess the magnitude of this risk?
Taking a close look at the numbers and underlying detail is a good place to start. As companies expand, either organically or through acquisition, there are increasing data and jurisdictional challenges, with multiple accounting systems and massive electronic data volumes in multiple jurisdictions the new norm.
The current economic and regulatory enforcement climate is putting corporates in a difficult position, with pressure to reduce costs and enhance corporate governance. Share price is affected both directly in response to regulatory enforcement action and where corporate governance failings are observed. Good compliance, however, not only directly reduces corporate exposure to enforcement actions (fines, legal costs, reputational damage and so on) but also underpins value (access to and cost of capital), and should therefore more than pay for itself — although this is not always an easy sell except to companies that have already been through the enforcement wringer…
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