The outbreak of the highly contagious and rapidly spreading COVID-19 virus continues to have a significant impact across the globe. Not only have travel restrictions and the concern of getting infected changed everyday life completely, there have also been drastic changes in the working world. Wherever possible, working from home has become the norm.
Although the precautionary measures have already been eased in many regions, companies are still advising their employees to work from home. This is also because some companies cannot offer the infrastructure to implement the required standard without making compromises. Due to the changed settings, usual work processes may no longer be adhered to as easily. The resulting lack of oversight as well as the pressure on cost and resources are leading to operational changes. These are bound to bring about compliance challenges.
1. Supply chain management
COVID-19 has had a significant impact on global supply chains. They may have been disrupted due to geographical risks, lack of access to vital supplies, logistical challenges and many other reasons. Companies may engage with new suppliers without conducting the appropriate level of due diligence to keep operational processes running as smoothly as possible. As a result, there may not only be an increased risk of dealing with unreputable or even restricted parties; companies may also be (unintentionally) exposed to economic sanctions risks and corporate liability. In addition, supply chain disruptions may also lead to competition law risks. Whenever companies seek cooperation with competitors, i.e. to deal with COVID-19 related issues, they should be mindful of competition law provisions (e.g. on illegal agreements, abuse of a dominant position and mergers).
2. Conflicts of interest and temptation
Working from home may lead to companies having difficulties monitoring their staff. Being aware of that fact, employees might not resist temptation to act in their own interest. For instance, conflicts may arise from the activities of sales and marketing teams – especially if their salaries depend on sales targets. With pre-COVID-19 performance targets, companies might create a significant risk of questionable behaviour. Therefore, it is advisable to revise ambitious goals in order to lower the pressure and motivation for disloyal actions.
3. Staff reduction
COVID-19 has led to employees doing short-time work or even losing their jobs. Compliance divisions or compliance officers may also be affected by reductions in staff, because they are often seen as an unnecessary administrative cost. Companies might also consider assigning the compliance function to employees as an additional task to reduce overheads. These people may neither have the time nor the adequate training or skills to take on this responsibility properly. As a result, they may not be able to recognise the “red flags” and consequently may not take appropriate action.
These are just some of the possible compliance risks that companies are currently facing. It is vital that such risks are detected at an early stage in order take mitigating measures.
Need for action
An effective compliance management system is crucial, especially in these unprecedented times. Risks of financial sanctions and loss of reputation can thereby be reduced considerably. Furthermore, an effective compliance management system demonstrates good corporate governance and strengthens the trust of employees, third parties and the public.
Do you need assistance or would you like to learn more about our solution-oriented compliance services? Being worldwide hands-on compliance professionals with efficient and tech-enabled working methods, our experts are happy to help you with your next steps. As your SME compliance buddy, we will support you with our dedicated compliance kits in any way we can.