What would you do if regulators turned up on your doorstep?

Alan Boswell Group

Palpitations, sweaty palms, a sudden pounding in your head — it can mean only one thing: the threat of an impending visit from a regulator.

The recent RSPCA investigations centred on poultry farms in Norfolk and Suffolk have highlighted the ever-growing potential for regulatory investigations, particularly for businesses in certain sectors such as farming, agriculture, hospitality and catering. As a director, partner or manager of such a business, you do your best to keep up with regulations all while keeping the organisation running.  But it’s far from easy.

Regulations are subject to constant change and the list of regulatory bodies you have to deal with is extensive — depending on the nature of your business you may have to answer to the HMRC, RSPCA, Environmental Agency, VOSA, DVLA and Trading Standards. Every one of which has the power and the right to investigate potential regulatory breaches or ‘wrongful acts’.

What happens if I fail an audit?

At best, regulatory investigations are intrusive and sweat-inducing. They’ll cause a load of stress and they’ll mess with productivity while you wait to discover if you’re in the clear. If you are, at least you can relax a little knowing that they’re unlikely to bother you again for a few years.

At worst, however, the palpitations you felt when the auditors knocked on your door will be the least of your problems. If the regulators find any cause to suspect a breach or ‘wrongful act’, the cost and damage to your business could be high. Unfortunately, as the company director, partner, or manager, the buck stops with you; as a controlling party of the business, you could be personally liable for any alleged wrongdoing.

It’s at this point that many directors discover that their insurance programme doesn’t cover this personal liability and depending on the severity and nature of the breach and the regulatory body in question, you could face serious consequences. You might expect disqualification from you role as director or even face civil proceedings which could lead to hefty legal costs, awards for damages or even criminal prosecution, fines and possible imprisonment. Clearly, it’s worth spending some time and energy on preparing for a regulator visit before the auditors turn up unannounced.

How do I prepare for a visit from the regulator?

  • Do your research

First things first, do your research on which regulatory bodies apply to your industry and then familiarise yourself with which regulations you need to know for your business. Ask yourself if your policies and procedures meet the minimum requirements to satisfy these regulations. If they don’t, then you know exactly where you need to start your preparation.

If your policies and procedures are looking pretty healthy, don’t rest on your laurels. Regulations change so make sure that you take responsibility for keeping up to date with the expectations of your regulatory body.

  • Conduct a practice run

Think about exactly what happens when the regulators visit your business, what they’ll ask, what they’ll want to see, and which documents you’ll be required to show them.  Then have a practice run.

Holding a mock inspection can be a great way of highlighting any weak areas you may have. Once you’ve identified your organisation’s strengths and weaknesses you’ll have a good idea of which areas the regulators are likely to challenge you on and you’ll be able to put a targeted action plan in place. It’ll also help employees know what to expect and how to react during an actual inspection.

  • Be involved

Whether an alleged breach is discovered at the highest level of the organisation, or is connected to the actions of lower level employees, the responsibility lies with you. Claiming ignorance won’t get you out of trouble. Protect yourself by being involved with all staff members and all departments so you know what’s going on at every level of the business.

  • Check your cover

Of course, no amount of preparation is foolproof and if an inspection were to hit you within the next few weeks or months, it’s too late anyway. This is why it would also be prudent to review your insurance arrangements and consider purchasing Directors & Officers Insurance. If you face criminal prosecution as the result of an inspection, Directors and Officers liability insurance may cover the cost of defending these proceedings, as well as any compensation costs that arise from an unsuccessful defence.

 

If you’re unsure whether your current insurance covers you in such situations, contact Alan Boswell Group and we’ll undertake a review of your insurance programme to give you peace of mind against unexpected regulation inspections - 01603 218000 or email hello@alanboswell.com.

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