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Crucial role of law as a tool for starting and growing a business

Wednesday May 18 2022
Law and business
By CATHY MPUTHIA

I was invited to give a talk on “Importance of Law for Businesses”. My talk centred on how the law can be used as a tool for growth. Many view the law as a set of “dos and don’ts”. The general view is that the law is a set of rules, regulations and procedures to be observed or face the repercussions. While this is partly true, the law is much wider.

The law forms a major part of any business environment and, therefore, it is crucial for a business to understand the aspects of the environment they operate in.

The legal area covers global, regional, national, county and sector environments. Big investors would always seek to understand the legal environment before putting money into a product or service. This is why good laws are crucial to attracting foreign investment into a country.

Similarly, businesses ought to understand their legal environment so as to make maximum use of it. The law is a double-edged sword when it comes to business as it can be used for expansion, but a change in law can create a harsh environment that would make it difficult to operate. Laws may create new opportunities for business.

Therefore, businesses that adapt quickly to legal changes can survive and grow faster than their competitors. A few years ago, the EU passed the General Data Protection Regulations (GDPR) that make it mandatory for businesses providing services to comply with the regulations.

These regulations, therefore, impact Kenyan businesses that have clientele in the EU. A business that quickly adapts and complies with GDPR would have an edge over competitors. Regionally, plans for trade integration on the continent through a series of trade protocols create enormous opportunities.

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The recent entry of the Democratic Republic of the Congo into the East African Community is another opportunity. Its entry was effected by a change in law. Nationally, there are constant changes to the law that create opportunities and shape strategy.

New business

An example is the Start Up Act, which opens the market for new businesses and their owners. Changes in law, however, could create a harsh business environment and may necessitate a shift in strategy. When the Covid-19 pandemic hit, public health regulations were tweaked fast and the change affected many businesses.

These regulations were actually changes to the legal environment. For a business to maximise use of the law as a tool for growth, it is crucial for it to, first and foremost, comply with all the relevant regulations and laws.

Secondly, it is important for a business to frequently update its knowledge of the legal environment to identify new opportunities that may come up. This can feed into the business strategy. It is also important to know how to adapt to a harsh environment created by a change in law.

This could mean diversifying or changing to a new line altogether.