While companies across Australia have been battling to keep afloat during the GFC, important business issues such as compliance have been sidelined as a consequence. Now that the worst seems to be over companies are once again starting to turn their attention back to the perennial challenges of building a solid compliance culture.

“We are finding that lots of clients have been focusing for the past 18 months on getting through the financial crisis but are now turning their minds to compliance,” Middletons technology group partner, Dudley Kneller, says. “They are coming to us and telling us that they are worried about the level of compliance (required), and asking for assistance.”

Adrian Verdnik, special counsel at Hall & Wilcox, says the GFC exposed weaknesses in the compliance frameworks of many companies as their arrangements – regulatory, contractual, financial – came under more scrutiny. “The lesson that many companies took out of the downturn, and the compliance issues that followed, is that they don’t want to be exposed to those risks again,” he says.

Verdnik says that the rise of the Labor Government in 2007 was also a key turning point. “The change in federal government has led to an almost unprecedented period of legislative change and policy review, in areas of the law (industrial relations, tax, superannuation) which were already quite complicated,” he observes. “Companies have realised that they cannot afford to approach compliance on an ‘ad hoc’ basis if they want to stay in touch with these issues. In-house legal teams have also been absorbed with substantial transactions over the last few years: ‘defensive’ work such as refinancing debt arrangements and litigation when the market was in a downturn; acquisitions and growth work when moving into new markets and taking advantage of opportunities now that the economy has started picking up,” he says.

“So they appreciate the value of having a robust compliance system in place that is tailored to their business, that can help look after the ‘business as usual’ work while in-house legal resources are devoted to substantial, one-off transactions.” 

Documentation

One particular area of concern for companies in Australia is documentation retention and access. Within various industries there are specific requirements as to what documents and data companies will need to retain, in addition to the broader requirements applied to all corporations. Financial services and the telecommunication industries, in particular, have a high level of compliance obligations.
“They are being overwhelmed by the level of compliance they are required to have,” Kneller observes. “Companies are struggling to find the right balance. They know that they have to retain documents and data, but they are not sure to what extent they need to do that.”

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