Compliance and Liability: How to Protect your Business?

External risks: Compliance

Compliance is not always understood correctly because it entails so many different aspects. However, one way of identifying your risks is to simply answer the following:

Does my business comply with all international and local laws and regulations?

Unfortunately, international and local laws and regulations come in many forms: these can be laws, regulations, directives, jurisprudence, etc coming from so many different regulatory bodies (the United Nations, the European Union, the country your company is registered in, where it is trading, etc), and dealing with numerous subjects: business, labour, environmental, criminal law (for example laws against corruption), and many others.

Failure to comply can have severe consequences, including but not limited to the levying of fines and penalties, loss of reputation or even the closure of your business.

What can I do?

Exercising due diligence is a great way to start. It means that you are trying your best to comply with the multitude of laws and regulations that impact upon the running of your company. More specifically, this would involve setting up a basic compliance management system with the following:

Standard terms and conditions being properly drafted to suit your needs, and being made available to your client and suppliers.

A code of conduct that is mandatory to be reviewed and understood by your employees, clients and suppliers.

An anti-bribery and anti-corruption policy to be reviewed and understood by your employee, clients and suppliers.

A supplier qualification process which can include a due-diligence questionnaire and a background check, especially with suppliers trading or registered in sanctioned countries.

Internal risks: Liability

Much like laws and regulations, claims have various types, spanning from cargo claims, third-party claims for loss of income/ loss of business to property damage and personal injuries, to name a few. Additionally, claims can be faced in any jurisdiction where your company conducts business (i.e. the country where a claimant chooses to file their claim), and from any the parties your company interacts his; for example your clients, your agents, sub-contractors, etc.

While you may be conducting your business for many years without facing any claim, this does not mean that your company is immune to potential claims that can be severe enough so as to expose your business to the risk of bankruptcy, especially those in relation to the carriage of expensive cargo, or claims in high-liability jurisdictions, such as the USA, and certain countries in Europe and Africa.

What can I do?

You can set up a liability risk system:

Make sure you have purchased sufficient insurance cover for your business needs. This is of the utmost importance.

Ensure you have General Terms and Conditions in place that protect you from liability as much as possible, and that you are trading under appropriate documentation, such as an airway bill or a CMR.

Always seek to sign contracts with your business partners to define accurately the responsibilities and liabilities of each party.

Should you ever receive a claim, it is important to understand that these have to be properly handled from the moment of first notification, otherwise your liability can escalate unnecessarily.

While there are many additional steps you can take over and above the ones outlined hereto, and even though risks will always be present, it cannot be overstated that basic prevention is paramount. Please contact Cecile at [email protected] should you have any query on this matter.