Over half of UK companies expect COVID-19 to lead to an increase in their risk profile with 71% expecting to increase investment in legal compliance. The largest anticipated risk increase is from health and safety, but cybersecurity should remain the number one boardroom concern in a post-COVID-19 world.
The figures are included in Osborne Clarke’s ‘COVID-19: Compliance Risk Survey 2020‘ which interviewed company decisions makers in a variety of business sectors across the UK.
Other key findings include:
Compliance with relevant laws and regulations in different jurisdictions and sectors is a significant but increasingly essential cost to business as legal teams and C-suite executives manage risk, of which COVID-19 is just the latest threat.
Risk fears
In the survey, health and safety and cybersecurity were seen as posing the greatest increased business risk as a result of COVID-19. There appears however to be a trade-off between the two with expected increased home working presenting more cybersecurity concerns but fewer health and safety concerns. While a return to office working potentially reduces cybersecurity risks but heightens health and safety concerns.
Mary Lawrence, head of health & safety at Osborne Clarke said: “COVID-19 has put a spotlight on health and safety in the workplace. Businesses who previously perceived themselves as low risk, office environments for example, are now needing to dedicate significant resources and time to creating a COVID-secure working environment.”
Investment
82% respondents said that their organisation’s anticipated level of investment in corporate legal compliance has changed as a result of COVID-19. But there is a split between large and small companies looking ahead to next year.
Of those with a turnover of less than £100 million, 70% anticipate an increase in their organisation’s level of investment in corporate legal compliance next year due to COVID-19. The reverse is true for companies with a turnover above £100 million where 62% actually anticipate a decrease (Q4).
71% however of all companies expect a long term increase in investment over five years. For those with a company turnover of £100 million and more, this rose to 78% and for companies with a turnover of less than £100 million, this decreased to less than two thirds (65%).
Katie Vickery, co-head of global compliance at Osborne Clarke, commented: “There are new and complex challenges arising as a result of the pandemic, but many clients and contacts are working in constrained financial conditions. Half of these experts expect to see a rise in annual compliance expenditure, half see a fall. The vast majority (71%) see a rise in the longer term. It will be interesting to see how this pans out as we move from the first wave of this pandemic to the medium and longer term economic effects.”
Law firms have been increasingly offering compliance services to their clients, a trend which COVID-19 has accelerated. The survey shows, however, that although external legal fees remain a significant part of client budgets, only 17% spend 20% or more of their budget on law firms against 51% spending 20% or more on technology solutions.
Business ethics
2020 has shone a spotlight on business ethics, especially in relation to the environment and diversity. 39% said that one of the most important drivers of investment in corporate legal compliance was ‘ethical stance’. However, just 27% said that ‘doing the right thing’ was one of the most important drivers. This might suggest that businesses care more about perception than the action itself. There is more evidence of this when you consider that ‘reputational risk’ has the highest percentage of respondents who said it was one of the most important drivers of legal compliance at 41%.
“Reputational risk has undoubtedly moved up the boardroom agenda. It’s often only when organisations have gone through a major reputational issue that they take it seriously. In an era of social media, reputational damage can escalate quickly and can be hard to contain. It’s an area in which investment in training will almost certainly pay off in the short to medium term,” said Chris Wrigley, co-head of global compliance at Osborne Clarke.
Download the full survey here.
