4 Nov 2024
Compliance is a dangerous afterthought.
With vast documentation and reporting requirements, compliance is often perceived as a time-consuming obligation, diverting resources from the core business functions. The complexity and ever-changing nature of regulations can make it difficult to keep up. As a result, compliance sometimes becomes a necessary burden to be addressed later, rather than an immediate business priority. However, neglecting compliance may lead to many negative consequences, such as costly fines and hindered growth.
When compliance isn’t prioritized, it risks compromising legal stability and ultimately undermining the effectiveness of business operations. Many companies focus heavily on expansion, product development, and market penetration, while pushing compliance to the backburner.
A common reason for this negligence is the demand that compliance places on company resources. Diverting time and funds to compliance management does not produce any instant results or directly visible benefits. But failing to address it often leads to compliance gaps, creating bottlenecks that can slow down or even halt progress at critical moments.
A prominent example of the consequences of neglecting compliance is the large fines that are being issued for breaches against the Market Abuse Regulation. In 2019, for instance, the French Financial Markets authority (AMF) issued a €20 million fine to a major bank for manipulating sovereign bond prices during the eurozone debt crisis in 2015. The case highlights the risks of postponing compliance efforts and shows how regulatory oversight can catch up with companies when they least expect it.
But the hidden costs of delaying compliance extend far beyond the immediate financial penalties. While multimillion-euro fines are staggering, the true cost often emerges as companies are forced to redirect resources from critical areas, scrambling to address compliance issues retroactively. When the situation becomes urgent, senior leadership and key employees are pulled away from their ordinary responsibilities to manage crises. This reactive approach inhibits strategic decision-making, as valuable time and attention are diverted to “firefighting” compliance-related problems. Regulatory breaches can also cause long-lasting reputational damage, eroding customer trust and tarnishing the brand image.
In the end, neglecting compliance not only stalls progress but creates a ripple effect that impacts every aspect of business, from finances to leadership, hindering the company’s ability to maintain its competitive edge.
While compliance is important across all lines of business, there are some areas where regulations deserve to be highlighted as particularly important, due to their strong impact on transparency and safety on the financial market.
For instance, the Market Abuse Regulation (MAR) establishes a legal framework to prevent unethical or unlawful actions on the financial market. Compliance with MAR includes maintaining accurate insider lists and implementing processes to identify and report suspicious transactions. The Markets in Financial Instruments Directive (MiFID II) include requirements of transparency in financial services, ensuring businesses operate fairly and in clients’ best interests. Finally, the Whistleblowing Directive aims to protect individuals who report any harmful wrong-doing or misconduct in the organization. Misconduct refers to illegal, unethical, or otherwise inappropriate behavior or actions, making whistleblower channels a valuable aspect of a well-functioning market.
Non-compliance with MAR, MiFID II and the Whistleblowing Directive can lead to hefty fines and damage investor, customer and employee confidence. Having the right tools and good legal support is essential for handling these regulations
Realizing the severe legal and financial consequences of neglecting compliance, some businesses turn to law firms for guidance. At this point, new challenges may arise. Traditional law firms often focus on risk mitigation, but they might overlook the daily realities of running a business. While they excel at law, they lack insight into the internal workflows of the businesses they serve. Legal advice is sometimes given without taking specific circumstances into consideration, making it harder for companies to integrate the guidance into their routines.
The often-occurring dissonance between theoretical law and business operations forces business owners to bridge the gap themselves. They are left managing both legal questions and operational challenges, instead of receiving legal advice that suits their
unique company. In addition to this, unpredictable legal fees and expensive advisory services can further discourage companies from seeking timely guidance.
Many businesses therefore delay engaging in legal support until a problem has escalated. This reactive approach compounds the issue, often leading to more complex problems than necessary. It’s safe to say that expensive, last-minute legal services not only strain budgets but also force leaders to shift focus from growth to crisis management.
These ongoing challenges underscore the need for a different kind of partnership — a partnership that acknowledges the significance of a compliance process that is both easy to manage and aligned with business oriented legal support. Therefore, EZlegal and ComplyLog have now joined forces to offer businesses a smarter, more integrated approach to compliance.
With ComplyLog, customers gain access to robust, automated platforms that streamline essential compliance tasks. InsiderLog automates the management of insider lists, ensuring that companies meet all obligations under MAR by securely recording and tracking insider data. TradeLog automates the monitoring of employee trading activities to prevent conflicts of interest, simplifing compliance with MiFID II and MAR. Meanwhile, IntegrityLog facilitates secure, anonymous whistleblowing in line with regulation standards, creating a transparent, accessible system for reporting misconduct.
To further support compliance management EZlegal offers legal consultations to ComplyLog customers, to make sure that businesses stay on top of compliance from a legal standpoint. For example, a company using IntegrityLog to manage whistleblowing reports might also need to establish a whistleblower policy. And if a report on misconduct should raise serious concerns, that same company could benefit from legal support on how to appropriately handle the situation. Here is where EZlegal can step in, by analyzing the individual needs of each company and developing a tailor-made legal strategy. Through a high level of service, experience with different areas of law and transparent price models, their goal is to ensure that the legal aspect of compliance becomes a natural part of daily operations.
The main purpose of this partnership is to help businesses avoid common concerns of fragmented compliance processes, with the ambition to prevent issues before they become overwhelming. Together, ComplyLog and EZlegal provide a comprehensive offering that combines technological solutions with legal expertise to address all aspects of compliance
Looking at the bigger picture, it’s evident that compliance is critical and should never be made an afterthought. Even though it might seem easy to point fingers at those who neglect compliance, it is important to keep in mind that many companies lack the tools and resources to handle it properly.
What businesses need is a solution that turns compliance into a proactive tool for success rather than a reactive burden. And that is what ComplyLog and EZlegal want to provide: an all-in-one solution, combining legal guidance with digital compliance tools to ensure that companies stay compliant while growing smoothly. This isn’t only about avoiding risks — it’s about using compliance to drive your business forward.
So, what if compliance wasn’t just a necessity, but a competitive edge? The future of business demands smarter solutions. Explore how ComplyLog and EZlegal can help you stay compliant, while setting the stage for long-term success
© 2024 EZlegal
