As lawsuits and investigations targeting fashion and apparel companies have intensified, such companies must develop robust compliance programs to mitigate risk. Further, COVID-19 has complicated matters significantly by creating disruptions in supply chain management, as well as creating a fertile ground for lawsuits over alleged marketing schemes and workplace violations. Recent high-profile bankruptcy filings by such stalwart companies as J. Crew and J.C. Penney only underscore the increasing financial pressure that fashion and apparel companies face in the current environment.
In this article, we examine some of the most acute risks fashion and apparel companies face and suggest best practices and fundamental steps fashion and apparel companies can take now to strengthen internal controls and implement procedures to mitigate risks in the future.
Fashion companies are no stranger to government investigations regarding the Foreign Corrupt Practices Act (FCPA). For example, in 2014, the Ralph Lauren Corporation paid a $1.6 million penalty to the United States Department of Justice and United States Securities and Exchange Commission (SEC) to resolve claims that it allegedly bribed government officials in Argentina to obtain improper customs clearance for merchandise and provided gifts to Argentine officials. Further, since there is significant regulation surrounding the fashion industry, including import and export regulations, FCPA investigations will likely increase over time.
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