Are You One Staff Change Away From Disaster? 7 Avoidable Regulatory Risks

Betsy Gonzalez
Posted on January 16, 2019 by Betsy Gonzalez in Business Compliance.

It takes foresight to prepare for a crisis. But it can take even more to foresee the hazards in everyday events.

Changes in staff, for example, are inevitable. Yet many businesses come to us in crisis mode because a key staff member has moved on, leaving the company’s licenses and good standing in jeopardy. The risks are particularly high in licensed professions, where loss of a qualified professional can set off a cascade of license forfeitures across an entire enterprise. When compliance is at stake, even momentary lapses can bring costly disruptions, penalties, and even hearings and citations.

Companies are usually blindsided by the fallout. They’d simply never envisioned the regulatory chain reaction that could result from a single departure.

In this blog post, we’ll connect up the links in the chain for you. We’ll examine three cases where companies suffered unnecessary damage from ordinary staff changes. Then we’ll help you assess your exposure to seven specific risks and provide concrete steps to mitigate them.

Understanding the Risk: Three Cases

So how can a single staff change damage a company’s compliance? Consider these cases:

An administrator who manages all aspects of licenses and corporate filings for a regional manufacturer takes an unexpected medical leave. By the time her coworkers figure out the paperwork flow, the company has missed numerous reports and renewals and has fallen out of good standing in three states.

A construction manager leaves his company to join a larger one. The manager was the company’s only qualifier, and there’s no one in the pipeline to take his place. The clock starts ticking on the company’s licenses in more than a dozen states, forcing a scramble to qualify another staff member—in some cases with less than 30 days on the clock.

A multi-state pharmaceutical company loses a corporate officer who served as registered agent. During the transition, notice of a legal action is misdirected, delaying the company’s response and resulting in additional legal costs.

So what steps can companies take to avoid similar problems?

Risks to Consider

To assess your exposure, consider the following seven risk areas. Is your company making any of these common errors? If so, we’ll show you fixes to protect your compliance and good standing.

1. A Scattered Approach

If you don’t already have all of your compliance activities documented in one place, your journey starts here. For many companies, regulatory compliance is not a central function. Often it is not even viewed as a coherent duty, but rather as a series of one-off tasks. We see everyone from office managers to executives to general counsel to accounting staff handling various aspects of compliance. Yet licenses, corporate filings, and tax filings are connected, often in ways companies don’t apprehend until it is too late.

If you don’t have a single source of truth and a clear view of all of these activities, your first task is to gather it all up and document it in one place. If you’re not even sure what your regulatory obligations are, our compliance checklist for businesses can help you cover the bases.

If you’ve already done this, you’re halfway there!

2. A Team of One

On the opposite end of the spectrum, some companies place compliance in the hands of a single staffer. Often, these employees are regulatory superheroes, going to great lengths to stay on top of changing requirements and never miss a deadline. Unfortunately, if that staffer is away or leaves unexpectedly, there’s no one else in the company who can step in.

No matter how big or small your company, you need a backup plan, either through a managed compliance service such as ours or through shared knowledge and resources. This is one of the biggest steps a company can take to safeguard compliance across everyday organizational changes.

3. A Volunteer Registered Agent

As the conduit for routing notice of lawsuits and other critical documents your way, your registered agent is key to your company’s security and financial well-being. There are many reasons why it pays to secure professional registered agent service.

The biggest is this: a professional service is your built-in contingency plan. Documents are automatically scanned, stored, and routed to your company for immediate attention. A top-notch service will also follow up to ensure that you access critical documents.

4. The Wrong Tools

Even with the best intentions and the most dedicated staff, managing compliance without appropriate software is risky. Spreadsheets, calendars, and paper files can only do so much for your teams when dealing with irregular deadlines and shifting requirements in every jurisdiction. Your staff needs a foolproof system to alert staff well ahead of deadlines for license renewals, annual reports, and other ongoing requirements.

Dedicated compliance software provides that single clear window onto compliance that is so essential to proactive maintenance. It also makes it easy to share responsibility for compliance across teams—and pass the torch when an employee leaves.

5. Communication Gaps

Your licenses and good standing depend on maintaining accurate records with state agencies. Changes in officers and directors, corporate addresses, contact information, qualifying professionals, and registered agent service must be promptly reported to authorities. Make sure you know what information is on file with state agencies. Then create a formal line of communication for reporting changes promptly (preferably automatically) to the staff handling compliance.

6. No Succession Plan

For companies in licensed professions such as engineering and pharmaceuticals, it’s critical to have a plan in case you lose a key qualified professional. Generally company licenses in these professions are dependent on the underlying licenses of professional staff. In construction, the two are inseparable: where the license holder goes, as in the case above, the company’s licenses follow. In these professions, a formal succession plan for qualifiers is crucial. Contact one of our account specialists for help with this.

7. No Backup

Licensing and good standing are complex. What works in one jurisdiction won’t fly in the next. Regulations and processes change all the time. This can pose challenges for staff who are not working with licensing and corporate filings every day, creating risk.

The final step in your contingency plan is to have compliance experts you can consult whenever you’re unsure of your requirements. Better yet, you can fully outsource the work to them and spare yourself the time and headache of handling state filings. Our clients have open access to a dedicated account team whenever they have questions, as well as fully managed service solutions that take the entire work of licensing and corporate filings off their plate. They simply take advantage of our software for monitoring compliance, accessing documents, and authorizing payments.

Have questions about your compliance practices? Would you like to assess your specific risks and review options for closing the gaps? Just get in touch or give us a call, 1-888-995-5895. We’re ready to put you on the path to worry-free compliance!


© 2012 - 2020 Harbor Compliance. All rights reserved. Harbor Compliance does not provide tax, financial, or legal advice. Use of our services does not create an attorney-client relationship. Harbor Compliance is not acting as your attorney and does not review information you provide to us for legal accuracy or sufficiency. Access to our website is subject to our Terms of Use and Service Agreement.