The cost of company director’s ignorance – Practical tips to assess your exposure

Person sitting on train tracks

Interesting article in The Age this morning. “The cost of small business company directors’ ignorance. You may be risking your entire wealth if you’re a company director for a friend or family member.”

Directors can be held personally liable for breaches of duties as a director and under legislation relating to workplace health and safety and environmental laws

“Limited liability” does not mean “no liability”.

Louise Petschler, GM Advocacy, AICD

Directors need to know that all compliance issues are being upheld and maintained. This not only covers financial compliance, but it also covers Staff compliance, Facility compliance, Product compliance as well as Supplier / Contractor / Vendor compliance. Ignorance is not an excuse.

Tom Raeburn and I wrote an article about this back in 2012 where we recommended that directors ask the following questions before their next board meeting. I’d now suggest you ask the same questions about your Staff, Facility and Product compliance as well.

Directors need to ask, can we demonstrate due diligence with our contractors today?

Before your next board meeting, ask for a report on supplier compliance that provides

  1. List of all certificates being tracked: Public Liability Insurance, workers comp, trade and high-risk work licences, etc.
  2. Compliance rating of every supplier: are all their certificates current and up to date
  3. Policy compliance of every supplier: do all suppliers match or exceed your internal policies
  4. List of non-complaint suppliers detailing expired and missing certificates.

..and put a time limit on compiling this report. If your organisation can’t put this together within half a day, it’s likely you don’t have the information.

Follow up the report by asking the following questions

  1. How often do we audit supplier compliance? According to Aberdeen, “monthly auditing is often the most appropriate frequency of auditing since it allows an enterprise to cull an accurate gauge of compliance”.
  2. What is the total number of certificates that we collect and track? 44% of organisations are trying to manage over 5,000 compliance documents each with different expiry dates.
  3. What systems and process do we have for tracking supplier compliance? 79.6% of organisation have no system or a manual system for managing thousands of compliance documents where manual include data entry in an excel spreadsheet or in house database.
  4. How long did the report take to compile? If it was going to take more than half a day, how long do you think it would have taken to complete? 56 % of companies have never run or found it’s too difficult to run a report on supplier compliance and even if they did run a report, 42% report having a low or very low confidence in the accuracy of the data as most of the information is out of date.

I hope this gives you some practical tips on how to assess your organisation’s compliance. If you would like to discuss further or have any questions, please get in touch via the website at

Nigel Dalton-Brown, GAICD, AMIIA, MBA

Managing Director, Chair, Speaker, Lecturer, Author

Nigel is the Founder of Strytex and has been presenting and writing on Goverence, Obligational Awarenss, Risk Management and Compliance administration (GORC) since 2010.

Leave a Comment