Influenced by some vocal commentators and politicians, regulatory compliance has tended to be characterised as a chore and a restraint on entrepreneurial activity. However, this is to miss the point that good compliance also represents an opportunity to enhance the value of a business.

The benefits of this are not only in making the business a more attractive trading partner or investment, but also in more localised and immediate benefits, for example fewer complaints, fewer days lost through sickness as a result of accidents and lower insurance premiums, best summed up as a quieter life generally.

A good compliance record may be an indicator of a well-run business, whereas a poor compliance record is undoubtedly an indicator of a business which has been badly run and may be at serious financial risk.

All businesses are affected by some regulations, such as the Health and Safety at Work Act, the Data Protection Act and antidiscrimination legislation. Some businesses have in addition specialist regulations covering their sector, for example in the financial services industry, various technical and scientific fields and the food and construction industries.

The general principles underlying enforcement have undergone a revolution in the last decade, measuring compliance not in ticking boxes on forms, but in practical outcomes. Businesses must not now expect to find 'to do' lists in statutes and regulations, but must instead take responsibility for designing, maintaining, monitoring and recording their own methods of compliance. The fundamental idea is that where there is good practice (which will not necessarily look the same in every business), there will be no penalties for and no record of non-compliance.

Alongside this shift in emphasis, regulators now give significant publicity to breaches and penalties on their websites, in addition to any incidental media interest there may be, with an inevitable risk to reputation and allowing prospective customers, investors and others to search public records to see the failures of management and administration in the organisation.

Above all, however, fines for regulatory breaches have increased very significantly and may be based on the turnover of a company, or the group to which it belongs. There are now no statutory limits on some fines for previous breaches and the Court of Appeal has indicated that it sees no difficulty in imposing fines large enough to put a company out of business, if a breach is serious enough, particularly if it relates to safety.

Part of the reasoning behind this is that where regulations are breached, there is often a cost to society of some sort, for example the cost of deploying emergency services, to the NHS for treating people who are injured, or clean up costs in environmental cases, etc. There is no reason why society should bear these costs when an incident has occurred as a result of the negligence or bad management by a company or its leaders.

In common with all other punishment regimes, the fines increase with each additional offence which need not be of the same type; a bad environmental record can be taken into account when considering fines to be imposed in, for example, a prosecution under the Health and Safety at Work Act.

A bad compliance record may therefore tell an investor something about the management of the company and influence its desirability as an investment.

Increasingly, therefore, it is necessary to include some consideration of the compliance record of a company in any due diligence or valuation exercise, including questions about pending investigations, as the gap between an incident occurring, and the imposition of a penalty may be quite lengthy.

The Corporate Governance Code 2016 provides that directors must have regard to regulatory compliance as a potential risk to the company, so failures would suggest that the risk exercise is not being adequately carried out.

In any analysis of the strengths and weaknesses of a business, the risk of regulatory breach should certainly appear as a threat but should also appear both as a strength and an opportunity.