Five legal and compliance gaps that could leave your business exposed
Legal risks in business are not always obvious. Understanding how different laws apply to your business and ensuring compliance can be challenging.
Even if your business has contracts, policies and procedures in place, outdated documents or gaps between written policies and day-to-day practice may leave it exposed. These risks can increase as your business grows, employs more people, collects more personal information, enters new commercial arrangements or changes its ownership structure.
“Many businesses do not realise they have a legal or compliance risk until a dispute, unpaid debt or regulatory issue brings it to the surface,” said Business Law WA Commercial Law Legal Director Cass Wright.
“Reviewing these areas early gives business owners an opportunity to address potential issues before they become costly problems.”
Below are five legal and compliance risks that businesses often overlook.
At a glance:
Legal and compliance gaps can expose a business to disputes, financial loss, regulatory action and operational disruption.
Business Law WA’s Business Compliance Health Check can help you identify areas that may require attention before they become a problem.
1. Contracts that do not adequately protect your business
The risk: Written contracts establish the rights and responsibilities of your business and its customers, suppliers, contractors and commercial partners.
However, simply having a written contract does not mean your business is properly protected. Contracts may no longer reflect your business’s operations, current laws or commercial risk profile.
The impact: Outdated, generic or poorly drafted contracts can create uncertainty about what each party has agreed to do. Ambiguous or incomplete terms may lead to payment disputes, unexpected liabilities, damages commercial relationships and costly legal proceedings.
What to do: Ensure you have written contracts for key commercial relationships, consider when the standard terms were last reviewed and whether these documents still reflect how your business operates.
Our solution: Business Law WA can review and prepare commercial contracts and standard terms that provide greater certainty and reflect your business’s current operations and risk profile.
2. Privacy data and online compliance gaps
The risk: Depending on its size, activities and contractual arrangements, a business may have obligations concerning how its collects uses, stores secures and discloses personal information. These obligations may arise under Commonwealth or State legislation, commercial arrangements, government contracts or industry specific requirements.
A generic privacy policy – or a policy copied from another organisation – is unlikely to accurately describe your business’s information-handling practices.
The impact: Non-compliance can expose businesses to complaints, regulatory scrutiny, fines, contractual breaches and reputational damage. Inadequate policies and response procedures may also limit your ability to manage a data breach or cyber incident effectively.
What to do: Map the personal and confidential information your business collects and consider:
- Why the information is collected
- How it is used and disclosed
- Where and for how long it is stored
- Who can access it
- Whether appropriate security measures are in place
- If your privacy notices reflect actual practices
- If your business has a cyber breach incident response plan.
3. Ineffective debt recovery processes
The risk: Unpaid invoices can place significant pressure on cash flow, particularly where a business has no consistent for monitoring accounts and following up overdue amounts.
The impact: Without clear payment terms and an established recovery process, a business may delay taking action, weaken its enforcement options or incur unnecessary costs resolving disputes.
What to do: Review whether your business has a consistent process for managing overdue accounts and appropriate contractual rights when a customer fails to pay.
Contracts should address payment timeframes, interest on overdue amounts, recovery costs, disputed invoices, suspension or termination rights and consequences of the breach.
Our solution: Business Law WA can advise on debt recovery options, strengthen contractual payment provisions and help your business pursue with simple debt recovery.
4. Work health and safety non-compliance
The risk: Businesses and other persons conducting a business or undertaking have duties under work health and safety laws. Officers may also have a personal duty to exercise due diligence to ensure the organisation complies with its WHS obligations.
Written policies alone are not enough. WHS systems must be current, implemented in practice and supported by consultation, training, supervision, monitoring and record keeping.
The impact: Failure to comply with WHS duties can expose an organisation and its officers to investigations, improvement or prohibition notices, penalties, prosecution and reputational damage. More importantly, inadequate systems can increase the risk of harm to workers and other people.
What to do: Your policies should reflect current legal requirements, be implemented in practice and be supported by appropriate oversight and record keeping.
Officers should be able to demonstrate that they actively acquire and maintain WHS knowledge, understand operational risks, ensure appropriate resources and processes are available, and verify that those processes are used. A due-diligence register may help record this oversight but should form part of a broader and properly implemented WHS governance framework.
Our solution: Business Law WA can review the legal framework supporting your business’ WHS governance and identify areas that may require improvement. Further Business Law WA can assist with prosecutions of there has been a workplace incident.
5. Weak governance and succession arrangements
The risk: Governance documents – such as a company constitution, shareholders agreement, partnership agreement or director resolutions – establish who can make decisions, how decisions must be approved, how conflicts are managed and what happens when owners, shareholders or directors disagree.
Succession planning is another part of managing governance risk businesses should consider.
The impact: Missing, inconsistent or outdated governance documents can expose your business to disputes, invalid decisions or uncertainty about who has authority to act.
What to do: Review and update company records and ownership agreements and consider if your business could continue operating without the current owner or any key person.
Our solution: Business Law WA can establish or update governance and ownership documents and help businesses plan for management and ownership succession.
Understand where your business stands
Legal and compliance gaps can be difficult to identify from within a business, particularly where established processes have been in place for many years.
Our free Business Compliance Health Check provides a practical starting point.
“This short questionnaire provides a personalised snapshot of business’s compliance position and identifies areas that may require closer attention,” Wright said.
“This allows our lawyers to provide focused advice and help the business put appropriate protections in place.”
Whether your business requires stronger contracts, updated governance documents, privacy support, debt recovery advice, WHS assistance and advice or broader compliance assistance, Business Law WA can help you prioritise legal risks and develop practical solutions.
Complete the Business Compliance Health Check to identify potential legal risks before they become a problem.
To speak with our team, contact us at [email protected] or on 08 9365 7746.
Legal Guides and Toolkits – customisable policies, that are practical and ready to use, to assist your business compliance.
The Business Compliance Health Check provides general information and a preliminary indication of potential compliance issues. It is not a comprehensive legal audit and does not constitute legal advice. Completion of the health check does not confirm that a business complies with all applicable legal or regulatory requirements.
This article is authorised by Business Law WA, an incorporated legal practice and wholly-owned subsidiary of CCIWA. The content of this article is general in nature and is not legal or professional advice and should not be relied upon as such.
