(Download) Looking at this title, did you think that the team at Orchid Advisors had decided to take up manufacturing à la Adam Smith?  While one of us would like to take up reloading, we are unlikely to start forging barrels in the near future. No, we were actually just reading through the list of folks signed up to attend our first annual firearms compliance conference in Florida this October 6 through 8.  In addition to the great cross-section of manufacturers who will be coming in, what struck us about the list was the specificity of titles of those who will be attending.  “ATF Compliance Coordinator.”  “Compliance, Safety, and Risk Management Officer.”  “Export Compliance Controller.” For a split second, there was a question of “Really?  That specialized?” It was immediately followed by a laugh with “Oh yes!” There are at least two variables at play in making a decision whether your FFL already needs or should evolve into compliance specialists.  First, there is a question as to the size of your FFL, perhaps measured by volume of transactions.  This question couples with an analysis of whether your FFL offers a specialized product or service on an interstate or international basis or to military or law enforcement agencies.  Second, there is a question of whether the responsibilities would fall to an internal employee, an in-house attorney, or an outside consultant or attorney. At some level, what we are talking about is risk management – an important concept for every business.  It’s not just the firearms industry that has to confront and master difficult questions that could otherwise result in regulatory violations, civil liabilities, or criminal penalties.  There is a very clear demarcation line between those businesses that grasp hold of this concept and consciously integrate it into the operating environment and those that don’t.  This construct can also bear a direct relationship between the company and industry oversight or failure consequences, such that for the firearms industry we are conscious that the operating environment is in a heightened and unpredictable dynamic and we are conscious that the margin of tolerance for lackadaisical operations is low. If we had a 3-D printer at hand in a live demonstration, we would grab four lines representing each one of these concepts, and manipulate the intersection to create a model for your company.  Instead, let’s do a simple, perfect-for-Friday exercise.  Why don’t you answer the following questions to rate the complexity of your business operations and the risk you are willing to tolerate?

1. Rate the complexity of your operations on a scale from 1 – 10, taking into consideration variables such as your compliance inspection history, the volume of production and/or sales of firearms, whether any are NFA firearms, whether any are imported or exported, whether any are modified for sale in a state with strict product specifications, whether any are government procurement contract specific, and whether any are custom orders.
2. Enumerate the compliance specialists on your team, both internal and external.Average the individual 1 – 10 ratings, considering both the duration of the relationship, the level of expertise, and the seriousness of response undertaken to a compliance audit or problem.Consider also your gut sense of whether the current person is the right fit for your FFL and truly knows the applicable ATF regulations.
3. Quantify the level of risk on a scale of 1 – 10 that you are willing to accept as a direct result of compliance decision-making, from regulatory violations, civil liability determinations to monetary settlements, judgments, or fines, to incarceration.Be specific.
4. List as a “7.5” the current, heightened state of legislative, judicial, and executive activity working in favor of the industry as against the industry (i.e., compared to a rating of “10” in January 2013).

Add items #1 + #3 + #4 and then subtract #2.  How high is your score on a scale of 0 – 40? Speaking in broad terms of the concepts of specialization of employee and consultant input, one can too easily be lulled into simply accepting the concepts – without applying them.  If you take the 10 minutes to print out these questions and actually write down your answers, you might surprise yourself with the score you attain.  The higher the score, the greater the need for an increasing level of sophistication in the structure and staffing of your compliance team. This is an interesting analysis for FFLs at all sizes to watch out for variables that can take one by surprise.  For example, a recent FFL question arose around a dealer in business less than two years providing a stylized product in a gun-control state (not CA), where questions are pending on the interpretation of statutory language around product restrictions.  When a question came up during an on-site inspection, the FFL had no available resource to bring in to assist with any aspect of problem-solving. In another recent example, an established FFL manufacturer learned that a contracted gunsmith had been making A&D entries for firearms of the gunsmith’s private customers.  This FFL likewise did not have any resource for compliance questions, and struggled to do the research. The best advice we can share at the end of this cup o’ Joe is that the time is well spent exploring external resources, discussing hiring potential, and considering employee training for specialized responsibilities within existing positions.  If you stumble into a situation that potentially involves a compliance break-down, you will suffer heightened anxiety trying to find immediate resource. You don’t wait to get to the range to figure out what safety and functional equipment you will need, do you?  Alright.  Then let’s take that familiar and comforting feeling of preparedness and apply it to compliance preparedness.  You’re going to like the outcome as much as you like that pattern from a rifle that groups inside 1” at 500 yards.