Small, mid-sized firms face ethics hurdles.

• Author: Park, Robertson T.
• Position: Ethics Corner

Industries, and the companies which operate within them, adapt to changing market conditions. Companies that fail to heed this central tenet of business management often fail.

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The extractive industries adapt to changing consumer demands on their products, and they go wherever the natural resources are to be found. Pharma looks for new markets for its products, which can result in product driven expansion or a movement of sales emphasis more generally to where growth opportunities exist.

Transport looks to newer and growing urban markets, where the investment dollars exist for large transit infrastructure programs. The defense industry is no different, and time has shown that it responds quickly and intelligently to changing market forces and demands. Increasingly, this has required looking into new and often opaque international markets.

The largest defense contractors have significant personnel and administrative resources devoted to meeting changing industry demands. They have people in place to assess changing markets and they have developed methods of redeploying their resources to meet the new demands. They also have legal, compliance and risk personnel who are positioned to navigate these changes and to protect the company from the new risks, which may attach to the new markets or market conditions.

Risk assessment is effectively the genesis of all intelligent compliance programs, and risk must be reassessed when the company and its markets change.

Smaller and mid-sized contractors may not have the luxury of these legal, compliance and risk resources when market conditions change for them, but they face the same potential legal, regulatory and enforcement risks. The risks and associated consequences may even be greater in fact, because while a large company can absorb the costs of regulatory or enforcement inquiries, these costs and the business disruption they create can be critical to a smaller company. They can in fact put the smaller company out of business.

These concerns are ripe for smaller and mid-sized defense contractors as today's markets increasingly move into more and more diverse and challenging overseas markets. Here, the risks of corruption, financing, cybersecurity privacy and other laws may become more immediate, and it is not good to ignore them or look the other way. Smaller companies must not simply plan for how to take advantage of new international markets, they must also determine how...