How to act with due managerial care in preventing unfair practices in times of crisis

Implementation of an effective compliance programme

The term “compliance programme” has recently become more and more common. The purpose of these programmes is, above all, to ensure that the company does everything necessary to prevent unlawful actions committed in the course of its activities or in its interest. The compliance programme can thus be defined as a set of measures within a company, which can take various forms depending on the size of the company, its organisational structure and the industry in which it operates.

For many companies, the coronavirus crisis is a sharp test of how effectively and reliably long-established internal rules and processes work in limited business. Many companies face challenges during the pandemic in the form of the need to immediately adapt their current agenda to the crisis regime.

After the experience of the (non-)functioning of the control and reporting mechanisms in the first wave of the pandemic, we see that many companies are beginning to take an active interest in streamlining already set internal processes or introducing completely new processes that have been lacking in the company. A number of organisations are now looking for suitable investors to finance their activities and are aware that a stable and functioning corporate environment significantly improves their position compared to competitors and increases their value in the event of the sale of the company or the entry of a strategic investor.

The imaginary icing on the cake of a properly set compliance programme is also the protection of the company from the consequences of individual failure, which is thus kept to a minimum. Therefore, an effective compliance program tailored to the company also acts as a “shield” to protect the company from sanctions by public authorities.

Even if there is any misconduct, the company's management may sleep well as it has done everything necessary to protect the company. At the same time, management simply proves that it acted with due managerial care.

Introduction and management of the ethics line

Every functioning compliance programme includes not only measures to prevent violations of legal regulations but also measures to effectively detect them. One way to quickly detect misconduct within a company is to establish an ethics line through which not only employees and management, but also third parties (e.g. suppliers) have the opportunity to report their suspicions.

The establishment of an ethics line will soon be a mandatory part of the “compliance package” of a wide range of companies. In late 2019, a directive on the protection of whistleblowers was adopted at the European level, which must be implemented by the member states by 17 December 2021. The directive imposes an obligation to establish an ethics line and to examine the reported suspicions of any company with more than 50 employees and a wide range of public institutions.

However, the mere introduction of an ethics line cannot be sufficient if the notifications received are not investigated and appropriate action is not taken following the results of the investigation. In addition to assisting with internal investigations, we help our clients set up appropriate processes and rules in such a way that each member of the ethics team knows his or her role. It is equally important that employees and management are properly trained to know of the existence of an ethics line and in which cases and how they can submit notifications.

Internal investigation of suspected unfair practices

An integral part of an effective compliance programme is also the investigation of suspected unfair practices. Companies must not ignore such suspicions, but must properly investigate them and then respond appropriately to prevent further unlawful activity and repair the damage caused. It is important to realise that even seemingly innocuous misconduct of employees or management can have serious financial, reputational and legal effects on the company and its partners, and in some cases can even lead to the bankruptcy of the company. It is therefore the duty of the management to act in these cases with due managerial care to respond appropriately to suspected unfair or unlawful practices within the company.

Internal investigations of so-called white-collar crime form a significant part of our services. We help our clients discreetly investigate suspicions of unfair practices in their company. With the help of other Deloitte forensic investigation, data collection and analysis experts, we obtain valuable information, which we then analyse in detail. Following our findings, we will recommend our clients a suitable procedure so that they meet their obligations to act with due managerial care and minimise the negative consequences of the actions of their employees or management.

As a rule, our work does not end with the investigation. In a number of cases, we provide our clients with legal support in terminating employment with their employees, recovering the damage caused or filing a criminal complaint.