Implementation of a compliance programme as a key element to avoid reputational risk

Written on 25 Oct 2019

Putting into place an organizational and management procedure to prevent crimes, not only aims to implement preventive measures to avoid sanctions, but also aims to create an ethical culture of compliance to avoid reputational risks, as this means that companies are involved in criminal proceedings.

Since criminal liability for legal entities was added to the Criminal Codeince, different allegations for corporate crimes have been made public, such as Cambridge Analytica or, more recently, BBVA or the listeria case in the region of Andalucía, the impact and importance that reputational risk can have on organizations have been made evident.

For a company, the difference between being acquitted or penalised is vital, not only to avoid, among other things, fines, its dissolution or its disqualification to receive public aid or procure public contracts, but also to avoid any damages that an event may have on its reputation.

The Criminal Code, since 2015, sets out that a company can mitigate its responsibility, or even be acquitted, in those criminal offences where they can prove that it has actually implemented a compliance programme.

This is why Criminal Compliance programmes are an incentive for companies to implement preventive measures with the purpose of creating an ethical culture of compliance, and avoid any risks to their reputation if involved in a criminal process.

However, as already stated by the Chief Anti-Corruption prosecutor, these programmes cannot be based on stereotyped models. Organizations must carry out a detailed analysis of their activities with the purpose of identifying and evaluating the risks inherent to the nature of the organization, and be able to apply effective management and control measures. Only then, will companies be able to defend before a judge the efficiency of their plan as an essential tool to prevent and manage risks.

Likewise, when preparing a Criminal Compliance programme, organizations must consider the reputational impact that a scandal may cause to their organization in criminal, tax and administrative matters. The objective of the plan must be the implementation of protocols and of the necessary actions (for instance, appointing a crisis committee that must immediately assess the risk and the specific impact of a crisis from an assessable and financial viewpoint, or manage both internal and external communications) that minimizes its impact.

In short, it is critical to keep the focus on the reputational perspective of compliance as an instrument of enormous strategic value to project an identity, avoid reputational crises and minimize the consequences of such conflicts on the image of the company in the event that a crisis becomes inevitable.