What is it and why should you care?

Imagine that you are the owner of a Mexican company, one of those that has been growing little by little, overcoming obstacles and conquering markets. You have a supplier with whom you have been working for years, always punctual and reliable. Suddenly, you find out that this supplier is indirectly involved in a corruption scandal in another country: money laundering, data falsification, or something so criminal that it could permanently damage those involved.

Although this may sound a bit “exaggerated”, it could happen to any company, including yours. No company is exempt! Fortunately, there are solid mechanisms in place to prevent companies from doing business with fraudulent institutions: compliance and due diligence processes, which we will explore in the following article.

What is compliance?

 

Compliance is basically the “superpower” your company has to make sure it’s following all the rules  phone number list  of the game. But it’s not just about complying with laws and regulations; it also involves creating a transparent and ethical business environment. In a world where corruption scandals and malpractice are the order of the day, companies need mechanisms to help them navigate turbulent waters.

So what is due diligence?

 

Due diligence is like doing a good check before a big trip. Imagine you’re buying a  how to improve your commercial proposals?  used car. You check the engine, make sure it hasn’t had any previous accidents, and check its history. Due diligence in business is similar. Before you sign important contracts or agreements, you thoroughly research the people or companies you’re going to work with. This way, you make sure you don’t get into trouble later on.

Where do they come from?

 

The concept of compliance has its roots in the United States, particularly with the enactment of the Foreign Corrupt Practices Act (FCPA) in 1977. This law arose in response to a series of corporate scandals involving bribery of foreign officials by American companies. The FCPA established a legal framework to combat corruption in the international arena, requiring companies to establish internal controls to ensure compliance with laws and regulations.

Due diligence, on the other hand, has an even longer history. Originally, it was used in the context of financial transactions and mergers and acquisitions, where buyers were required to investigate and verify the viability and risks associated with an investment or purchase. Over time, this concept dating data expanded to include risk assessment in business relationships, especially with regard to the integrity and reputation of business partners.

And how is Latin America doing on these issues?

 

According to a recent study by Wolters Kluwer, 48% of organizations in Mexico have difficulty tracking how their partners comply with regulations. This shows that, although compliance is gaining strength, there are still many challenges to overcome.

Furthermore, cybersecurity management has become a crucial compliance challenge, especially after global cyberattacks increased by 38% in 2022 (Expert Solutions). This has led Mexican companies to strengthen their security policies and pay more attention to ongoing compliance.

In Latin America, ten countries in the region rank very low in the Corruption Perception Index (CPI). This context makes compliance programs not only important, but essential for companies that want to maintain their reputation and avoid legal and financial problems.

If I own a business, should I be worried?

 

If you own or manage a company, not having a compliance program or performing proper due diligence can lead to legal issues, penalties, loss of reputation, and in extreme cases, bankruptcy. This is no small matter; it is the difference between staying in the game or being eliminated. With the rise of technology and globalization, information travels faster than ever, and any wrong move could put everything you have built at risk.

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