According to a survey by ‘big four’ accountancy practice Deloitte, some 51 per cent of companies ‘do not have a documented response plan for dealing with regulatory breaches’, despite the fact that 70 per cent say they frequently discuss the issue at board meetings.

Damaged reputations

The survey – conducted in conjunction with London-based newspaper Legal Week and which questioned general counsel in leading corporates -- also found that just a third of companies monitor identified regulatory and legal risks.
That failing, according to Deloitte, could leave those companies ‘unable to demonstrate to regulators that their control structure is adequate’. Indeed, the accountants go on to say that ‘at worst it could expose them to significant financial loss and reputational damage’.

Rising costs

Commenting on the research, Peter Maher, a partner in Deloitte’s forensic services practice, said: ‘We are seeing high-level discussion of regulatory and legal risk within organisations, which reflects the increasing financial and reputational costs that failures in this area can cause. These costs can be significantly limited if critical issues are identified and effectively dealt with in the early stages of an investigation, so it is surprising that many companies do not have a plan.’
The researchers also highlighted concerns that in-house corporate legal teams are dangerously swamped with planning and due diligence issues when their companies expand into emerging markets. Almost half the respondents said this was a major contributor to increasing compliance work.

Corruption
 
Another Delotte partner, Emma Codd, commented: ‘There is a need to recognise the associated risks, which can include corruption, money laundering and reputational damage.
‘Companies must make sure they do enough pre-acquisition due diligence and ongoing monitoring to identify and mitigate these risks. The consequences of not doing so can range from the loss of an asset to conflict of interest issues and exposure to enforcement and regulatory action.’