Companies tend to think about corporate functions as one of two things: a revenue center or a cost center. An employee or division of a company either makes money or costs money. Human Resources, for instance, is typically considered a supporting function: a cost center. A sales team, by contrast, is a revenue center. Companies tend to think of international compliance programs, such as the Foreign Corrupt Practices Act (FCPA), international sanctions, or anti-money laundering, as cost centers. In other words, companies spend money to comply with these laws and regulations because they must.
Truly successful companies, however, think positively about their compliance and legal functions and view them if not as revenue centers, then at least as adding value. Building an FCPA compliance program, for instance, needn’t cost an inordinate amount of money, and for any company selling products or services overseas, particularly in highly regulated industries, such a program is vital. Compliance programs should always be risk-based, meaning that a company should look at its unique risk profile regarding the nature of its business, the risks of the countries in which it does business, and so on. One size does not fit all, and a small manufacturer exporting to Asia shouldn’t have the same compliance program as a Fortune 100 company.
A good international compliance program enables companies to identify and mitigate costly regulatory and reputational risks, and therefore helps companies protect value. However, compliance is largely about deepening one’s understanding of the markets and partners with which you do business, and therefore can also create value. When building an FCPA compliance program, a company should educate its workforce about corruption risks in certain countries and conduct due diligence on its customers and partners in high-risk countries, such as China, Russia, or Brazil. This information can provide critical insights, improve cultural understanding when operating overseas, and give a company deeper understanding of the opportunities in a market. FCPA compliance is also about conducting business openly and ethically and is proven to positively impact corporate culture, building trust and dialogue both inside and outside of the organization.
It is easy to think of legal and compliance functions simply as cost centers, but companies should resist that temptation. At the very least, take the time to think broadly about how building effective compliance programs can positively impact other aspects of your business. You may be surprised.
Please reach out to us to discuss your company’s specific needs and how we can help put an appropriate compliance program in place.
Learn more about our International Regulation, Enforcement & Compliance group.