COMPLIANCE AND LEGAL RISK || TRAINER ANIL MAURYA

Compliance And Legal Risk। Trainer Anil Maurya 

Objective 

  • To minimise the compliance and legal risk

Key Learning

1. When does compliance risk arises?

Compliance risk arises due to:

  • Breach of internal & external regulations
  • Breach of contracts
  • Breach of laws

2. Key points of compliance & legal risk

  • Applicable laws
  • Companies act
  • Trust
  • Income tax
  • FSSAI (Food safety and standards act)
  • Drug license
  • Applicable penalties
  • Imprisonment
  • Fine
  • Appear before magistrate
  • Obligations under a contract
  • Quarterly budget
  • Actuals
  • Returns
  • Tax
  • Risk rating
  • CRISIL
  • CARE
  • ICRA
  • Compliance status

3. Impact of compliance risk

(i.) Legal impact

  • Fine
  • Imprisonment
  • Product seizures
  • Penalties

Legal impact arises when you ignore laws thinking that related ministry is also ignorant about the same.

For example:

  • In the year 2017, the Ministry of corporate affairs strike off around 2,00,000 companies nationwide because these companies failed in legal compliance.
  • This hampered the business operations wherein owners had to put efforts and time in the court of law.

(ii.) Financial aspect

  • Profit & loss account
  • Loss of investor confidence
  • Share prices
  • Potential future earnings

It affects the business financially when the business owners invest time and effort in handling legal aspects.

Also, when the information regarding legal issues is spread in the market, profit and share prices fall.

For example:

  • Some years ago, Maggi had to face legal issues as the brand was accused of using excessive chemicals in their product.
  • As a result, the entire stock had to recollect from the market and it was not allowed to sell this stock again.
  • So, the competitors gain the market share of Maggi such as Yippee noodles, Patanjali noodles, etc.

(iii.) Reputational impact

  • Affects customer perception
  • Decreases employee confidence & customer trust

For example:

  • Maggi's case affected the reputation of Nestle brand in India.
  • The business came to the position of standstill due to non-compliance with rules.

4. Compliance & legal risk – Mitigation

  • Track compliance cost
  • Monthly
  • Quarterly
  • Yearly
  • Build a dedicated compliance team
  • Update documents according to law amendments

For example:

  • During Covid 19, many companies were not working or working only on 50% of staff.
  • The government realised the situation and it amended the provision of holding annual AGM from 30 Sept to 31 Dec.

Thus, you should follow all the points to avoid compliance risks in your business.

Key Outcomes of the Video

  • Build a dedicated compliance team to handle compliance risk
  • Track compliance costs regularly to avoid compliance risk

Comments

Post a Comment

Popular posts from this blog

ASSET BACKED RISK || TRAINER ANIL MAURYA

Objective of the E-BOOK  To avoid asset-backed risk Key Learnings from the E-BOOK  1. What is asset-backed risk? Asset backed risk arises when an asset is used as a collateral or as security against some risk. This asset is sold, liquidated, and transferred to reimburse the risk amount. When there are fluctuations in underlying securities, asset backed securities valuations will also be affected by them. This will result in the following challenges for a business: Prepayment risk Repayment income stream Change in interest rates For example: 1. Share value increase An investor checks asset backing while investing in your company. If your asset backing is sound, he will invest money in your business; otherwise, he will withdraw even the invested amount. So, your share value increases if you have asset backing. 2. Mining sector Mines are the main asset of mining sector. If there is no more exploration in the mines, the company will be over and the investor will withdraw the mon...
Read more