Regulation in business: Corporates should watch judicial decisions for compliance yardsticks.

  • 28 Mar 2024
  • 2 Mins Read
  • 〜 by Brian Otieno

As the world continues to transform rapidly, business regulation continues to grow unabated. Regulations come in the form of laws made by Parliament or common law (laws emanating from judicial decisions). Fundamentally, and due to the fast-paced and interconnected nature of modern-day business terrain, the fundamental place of compliance must be maintained. Therefore, a robust and comprehensive compliance model is not an option but a fundamental imperative for any company, entity, or organisation.

While compliance is very costly, the only thing that is costlier than that is non-compliance. In today’s fast-paced and interconnected business world, the stakes are higher than ever for organisations. Compliance is not just a pressing need; it is crucial to their success and survival. Entities have greatly put in the financial acumen to stay compliant and, by extension, competitive. Despite the high stakes and a great allocation of resources, many firms are still grappling with compliance. This is largely due to companies not entirely appreciating the full width and breadth of what compliance entails.

H.W. Longfellow, a celebrated American, aptly captured the essence of compliance when he retorted that “it takes less time to do something right than to explain why you did it wrong.” These words resonate greatly with corporates operating in the current world. The current world of commerce is characterised by dynamism, exacerbated by technological disruptions that make it increasingly important for entities to constantly recalibrate their risk and compliance strategies.

While greater attention has been placed on complying with, responding to, and adhering to regulatory changes, not much attention has been given to pronouncements by courts that undoubtedly have far-reaching implications for compliance strategies. Courts, while exercising judicial power, can interpret regulatory provisions, resulting in either a better understanding of the regulatory framework or widening the scope in terms of its application.

Judicial processes are indeed a key ingredient of the overall corporate transaction sphere, particularly among the key players, investors, directors, management and staff, and the government. Not only do they come in handy to respond to disputes, but they also shed light on pertinent issues that are key to business continuity. Suffice it to say decisions that emanate from the judicial arm of government, touching on corporate affairs, are essential in cementing and inculcating a culture of sound corporate governance. Ordinarily, the binding nature of judicial decisions reinforces the need for corporates to take them keenly.

Courts, the world over, have greatly shown that they are both able and willing to act quickly and effectively to respond to legal and regulatory questions in a dynamic business world. Business needs continually shift, and while Parliament may take time to craft laws to respond to these emerging trends, courts have the power to interpret existing laws in a manner that takes into consideration the prevailing circumstances. By constantly scanning pronouncements from judicial bodies and incorporating them into their operational structures, companies stand a chance of hitting the heights of proper compliance.

Recently, Kenyan courts and regulatory bodies that have quasi-judicial functions, like the Office of the Data Protection Commissioner (ODPC), have made judicial pronouncements that have huge compliance implications. For instance, the decision by the High Court to redefine the duty of reasonable care and skill for financial institutions will be proper guidance for players in the financial services industry to take up and recalibrate their complaints handling procedures.

To sum up, compliance is not a hard-stop measure but a continuous journey, and compliance strategies should ideally exhibit flexibility and dynamism for a competitive edge.