The article was also published on hvg.hu
Compliance with legal regulations is essential for business entities. However, ensuring simultaneous compliance with other requirements is equally crucial. This necessitates a coordinated and lawful internal operation that considers expectations and their interdependencies.
One of the greatest challenges for economic organizations is achieving compliance, as it serves as a tool for gaining a fair competitive advantage, strengthening market position, and increasing profitability. Therefore, businesses must find solutions that enhance their reputation through the development of lawful processes. This necessity is becoming increasingly pressing due to the European Union’s Directive 2019/1937, the intensifying economic competition, and the significant rise in registered financial crimes. The real solution lies in the establishment and operation of a company-specific compliance system, as it ensures a long-term, continuously monitored structure rather than temporary fixes. This guarantees that the organization keeps up with the ever-changing legal and economic landscape while also ensuring that a well-implemented compliance system remains independent of management changes. Thus, any modifications in ownership or leadership will not (and cannot) impact the organization’s ability to remain legally compliant.
Handling Corporate Misconduct – What to Do and What to Avoid?
Businesses are playing an increasingly responsible role in mitigating legal abuses, considering the emergence of cost-efficient litigation strategies and the latent nature of corporate misconduct. The new Whistleblower Protection Act, along with regulations for internal reporting systems, enables employees to report unlawful actions, omissions, or any form of misconduct.
In Hungary, 60-70% of crimes involve property-related offenses, including theft, embezzlement, fraud, misappropriation, and negligent management. Violent crimes against property, such as robbery, extortion, or self-administered justice, are also prevalent. Additionally, crimes committed against economic interests—such as tax fraud, failure to fulfill supervisory obligations, money laundering, bankruptcy fraud, and the violation of business secrecy—must be emphasized. Other offenses, such as professional misconduct, sexual coercion, harassment, defamation, or slander, may also manifest within corporate structures.
Whistleblowers are entitled to protection, and reports are not solely directed against organizations but can also highlight issues that benefit them. During an internal investigation, companies must evaluate reported, alleged, or already committed misconduct and take appropriate corrective measures. It is important to note that many corporate crimes likely go unreported to authorities due to concerns about reputational damage, loss of trust from business partners and clients, and the significant financial and time investment required for legal proceedings. If an internal investigation deems a criminal complaint necessary, appropriate steps must be taken to file it.
Preventive Measures
The primary goal of a compliance framework is to prevent misconduct. Several ISO system standards reference firm-wide approach principles to achieve this. The aim is to minimize both detected and undetected cases of legal violations, thereby reducing the need for internal investigations. However, for this to be effective, compliance processes must be fully functional. Results do not necessarily stem solely from sanctions or the threat of punishment; instead, organizations should establish internal regulatory frameworks that naturally guide stakeholders towards compliant behavior.
In addition to compliance-focused measures, litigation cost reduction strategies and the expansion of economic mediation can promote a more conscious corporate approach. This ensures ongoing legal compliance and a more responsible focus on legal consequences within corporate processes. These developments demand higher expectations and a more responsible operational model from businesses. Companies must be capable of establishing internal courts and information channels to detect unlawful behavior, improper practices, and potential risks in advance. Addressing these issues ensures a legally compliant, ethical, and professionally aligned business success model.