For SMEs, compliance is something that they have to be aware of, and there might be a few members of staff whose job it is to make sure that the company follows whatever rules are required of it. For major multinationals however, compliance is an enormous consideration that takes a significant amount of effort to stay on the right side of. There can be whole departments dedicated to compliance, because failure to stick to these rules, whether imposed by governing bodies, governments, or international organisations, can have severe consequences for the business. In this article, we’re going to take a look at some of the major things that multinationals have to think about when it comes to their compliance function, and in particular those that one-country SMEs might not even have thought about.
In the information age, the handling of data is becoming more and more important. As it becomes increasingly recognised as a tangible asset that can do good and bad depending on whose hands it’s in, governments the world over have begun to introduce laws around the way in which businesses can use data, and especially when it comes to using data about people. Multinationals tend to hold information about a huge number of people from all over the world, which means thinking about a great deal of regulations.
One of the most significant and well known pieces of legislation is GDPR, which launches fully in May 2018. It’s the EU’s main piece of legislation for detailing how businesses and organisations can use data that’s about EU citizens. It’s wide ranging, and applies to anyone doing business in the EU. One of the main issues that it introduces is around permission - businesses can no longer collect information about a person without their consent, or without a very good and specific reason. A great many businesses are going to have to change some of their processes in order to ensure they are GDPR compliant, which could cost them a lot of money. In many cases, it will be the compliance department working with IT and other functions to ensure the regulations are met.
This is perhaps the area of compliance that gives multinational businesses their biggest headaches, because it affects pretty much any business that employs people in more than one location. Again, the consequences of failing to comply with local laws can be very severe for the business involved, and in addition, people's livelihoods are affected too. When it comes to immigration and visa control, policies can be extremely strict, and at their worst violations can result in things like deportations. Naturally this is something that multinationals will do their utmost to avoid, which is why HR departments for global businesses will be hugely important, and will have a very large amount of consideration for legalities.
Similarly, if we think about the differences in employment law between countries, it’s easy to see how big businesses will need to be very careful about how they approach things. In some locations, it’s much more difficult to let staff go than in others, and there needs to be a balance between what’s best for the company, and what keeps employees happy. Paid holiday days are mandated in the UK for instance, but they’re not in the US.
Of course, not all multinationals will have to think about the same compliance issues. Industry specific regulations can be among the most complex, and the ones that require the most dedication. In the world of finance for example, there are huge numbers of laws that will vary from country to country, and the fines for falling foul of them can be huge. This becomes especially complex when laws contradict one another, or products have to vary in different locations. MIFID II is one of the EU’s regulatory instruments that pertains to the way financial brokers are allowed to operate, and came into force January 2018. It’s expected to cost billions for businesses as they restructure operations and products to follow the new rules. It’s had such an effect that bond trading volumes dropped when it went live.
Making products of almost any kind is more difficult when there are borders involved. Going back to the EU for instance, there are rules on how safe children’s toys must be. This might not be the case everywhere, but if your business is selling to the continent, then you have to comply.
We’ve already mentioned the fact that big companies often have entire departments dedicated to compliance, but how exactly do they ensure that things are being adhered to throughout the rest of the organisation? The answer is in training and good information dissemination.
Compliance has to be the responsibility of everyone involved - not just members of the compliance department. For the best businesses, compliance will be seen as simply a normal part of everyone’s day-to-day job. If all employees know what they have to do to comply, it makes everything much easier to coordinate - just like many other business considerations. To find out more about what compliance training can involve, click here to go to our dedicated compliance training course section.