Small and medium-sized enterprises in Spain and Portugal continue to risk losing potential investment and supply chain contracts and could face criminal charges
Small and medium-sized enterprises (SMEs) in Iberia are still largely unaware of the need for regulatory compliance and consequently face the risk of being denied finance, losing supply chain contracts with major companies or facing criminal charges, according to lawyers in Spain and Portugal.
KPMG partner Alain Casanovas says that levels of awareness of the need for compliance are growing, but that, in general, smaller companies remain unaware of the issue. “Clients are now realising that they could potentially suffer other consequences than sanctions if they do not have a compliance programme in place, such as be denied finance,” Casanovas says. “That said, compared to larger companies, smaller companies are generally not aware of the need for compliance.”
The perception of the compliance-related risks faced by SMEs differs widely (see Regulatory Compliance Annual Report, page 40). Enrique Luzón, senior associate at Gómez-Acebo & Pombo, says not all companies face the same risks when it comes to compliance. “Major international companies involved in a criminal investigation seem to be more worried about having to face immediate reputational problems, whereas smaller companies would be more worried about having to face the payment of fines that could be imposed at the end of the criminal process.”
But Casanovas says SMEs do face significant risks if they are subject to a criminal investigation. “If a small or medium-sized company in a supply chain is facing a criminal investigation, clients – who may be big entities – may discontinue their relationship with them.”
The business case for having a compliance programme is emphasised by Cecilia Pastor, partner at Baker & McKenzie Madrid and head of the corporate compliance department: “Big companies will require third party intermediaries to have compliance programmes as well.”
Maria João Ricou, managing partner at Cuatrecasas, Gonçalves Pereira in Lisbon, says lawyers have to work harder to sell the concept of compliance to domestic Portuguese companies. “You don´t need to “sell” [compliance] for instance to a US multinational, but with domestic companies, while some are already sensible to compliance matters and want to prevent the associated reputational and cost contingencies, some are less so, so you have to be more proactive with these” she says.
Ricou adds that clients should realise that it is “much wiser and much cheaper to take measures to prevent any compliance-related problems arising, rather than trying to tackle a problem after it has occurred”.