The long-awaited UK Bribery Act is now upon us, and could have far-reaching consequences for organisations of all sizes.
The Bribery Act came into effect on July 1st and makes it illegal to offer or receive bribes while making it easier to prosecute companies found to have made corrupt payments abroad. The Act updates laws dating back to the 19th century and applies to individuals and companies, both UK and overseas, provided they have some operations in the UK.
It’s clear that many businesses have questions around the specifics of the Bribery Act, with some experts suggesting that UK companies aren’t ready for the Act to come into force. If prosecuted, companies are required to show that they had ‘adequate procedures’ in place to prevent bribery occurring, which can include staff training or carrying out risk assessments. However, a survey by KPMG found that one third of companies have not yet conducted an appropriate risk assessment.
It’s vital that small businesses gain an understanding of the Act itself, not least because if prosecuted successfully, company owners can face up to ten years in prison while both companies and individuals can face unlimited fines. In this way, the introduction of the Bribery Act should serve as a timely reminder that there are actually a wide range of rules and regulations that small businesses aren’t half as familiar with as they may think they are.
While it’s almost impossible to ask a small business owner with limited time and resources to gain in-depth knowledge of every single piece of business legislation, it is vital that they cover off the basics, particularly given that regulatory breaches could potentially affect a firm’s credit score – both directly and indirectly – and thus harm the businesses’ chances of securing new business or finance.
For example, the Bribery Act carries the threat of criminal conviction for directors that fail to carry out sufficient background checks on employees found guilty of fraud. While a criminal conviction is very serious in itself, it could lead to director disqualification and could ultimately make it a factor for credit assessment. Credit reference agencies produce credit scores based on a range of characteristics, including the financial strength of a company and the behaviour of the directors to predict the likelihood of the business failing. Evidence of non-compliance with regulations could call into question the running of the business and would thus be likely to result in a lower score. Furthermore, if the director moves to a new company, their record will move with them. This further emphasises the need to safeguard themselves and their operations by ensuring that they have robust internal processes in place when it comes to recruitment.
There are scores of other rules and regulations that business must conform to or risk a negative impact on their credit scores further down the line – for example, if companies fail to file key documents such as their annual report on time. Micro businesses often don’t realise the significance of these key dates, but historical evidence shows that late accounts usually mean bad accounts. It’s key for an SME’s financial and credit health that they do not inadvertently create this impression through failing to carry out simple procedures within a specified time frame.
The question is, what can be done about it? Businesses aren’t expected to spend their time reading through the small print of every rule and regulation which could affect them. However, they are expected to act responsibly, and with each rule and regulation, they need to give some consideration to the implications of non-compliance – ie what will the financial perception be of their business as a consequence?
Over and above garnering a basic knowledge of such regulations, companies should also make full use of the business support organisations and online networks and the advice that they can offer. Greater awareness of regulatory matters could put your business at a significant competitive advantage, as SMEs that educate themselves minimise the risk of fines or running into legal trouble and are far less likely to allow unscrupulous or savvy suppliers, customers or staff take advantage of them. It takes a lot of hard work and money to start a business – this should not be thrown away at the cost of spending time getting to know the appropriate regulations.
Article contributed by Simon Streat, SME managing director, Experian UK