WHILE THE corporate reform debate continues here, companies in Europe are increasingly paranoid about regulatory action against them, according to new research.
A study from UK law firm DLA Piper found that 40 per cent of major companies in Europe expect to be investigated by their regulator in the next 12 months. Moreover, 57 per cent believe their industry will be investigated in the coming year.
The research also found that reputation risk management remains an elusive concept for most firms. Less than 30 per cent of those surveyed said they consulted a communications expert when drawing up a reputation risk management plan. Moreover, 51 per cent have no crisis management plans in place at all.
“The statistics on the lack of crisis management plans are shocking,” said Neil Gerrard, global head of the regulatory and government affairs group at DLA Piper. “An investigation by a competition authority, for example, can result in fines worth 10 per cent of a company’s turnover. The company can also be forced to sell-off parts of its business. Such events can, without careful handling, irreparably damage a company’s reputation and financial position. Firms across Europe need to address all potential areas of risk in order to manage that risk as effectively as possible.”
European and Australian companies are increasingly concerned by what is seen by some as “regulatory creep” from the US. Indeed, US anti-money laundering laws give the US the power to extend regulatory actions beyond their own borders.
“Regulation is on the increase and the consequences are more real than ever before. Companies are facing huge fines. Directors are facing extradition, imprisonment and/or fines,” Gerrard said. “Companies need to be aware of and manage this risk. They owe it to themselves and their shareholders.
“Companies need to be able to manage and respond to domestic and EU regulation and, increasingly, the long arm of the US authorities. However, our survey clearly shows that they are failing to put in place a comprehensive response to managing these risks. They are putting themselves in grave danger by failing to address these problems.”
According to DLA’s research, US-listed companies are also failing on compliance. Just 52 per cent said they have a structured compliance plan in place and 29 per cent would be unable to cope if investigated or raided by a regulator.