East recently spoke with Stella Lim, Head of Corporates, APAC, SWIFT about the research and what the future holds for Corporates in terms of risk and compliance trends.
What encouraged SWIFT to research these issues?
SWIFT, as a member-owned cooperative, has been serving our communities for over four decades with market practices and utility solutions to industry issues. Historically, financial institutions have been SWIFT members. In recent years, an increasing number of corporations of various sizes and capital worth have been joining the SWIFT cooperative society. As such, we felt that this is an opportune time to commission this piece of research especially for corporates on SWIFT as they are growing in membership. We live in an era of heightened cyber and compliance risks, and SWIFT is committed to reinforcing the security of the global financial community.
How do you see the current corporate risk and compliance functions in Asia Pacific?
We see that the current corporate risk and compliance functions increasing in importance across the many corporations that we work with. Gone are the days where our clients rely on their banking partners to manage their corporate risks and functions. As more and more Asia Pacific corporations globalise and expand across diverse markets and jurisdictions, they are quickly exposed to the implications of liabilities of their own corporate governance.
What risk and compliance concerns are keeping CFOs up at night?
Amongst the CFOs we work with, we see three emerging areas of risk and compliance concerns.
1. Executing on growth plans
Despite concerns that the global economy is not nearly as robust as they’d like it to be, many CFOs are nonetheless pushing forward on growth plans in Asia Pacific and across the Belt and Road. That focus entails its own set of concerns, however, including the ability to identify liquidity agility, capital flow and investment targets and, conversely, divests themselves of certain assets. Therefore, having visibility to where their cash is will be king. CFOs in APAC need to be continuously vigilant on operational efficiency and the capital allocation process to minimise operational risks.
2. Harnessing on technology
New technologies—everything from blockchain to mobility to robotics—have the potential to disrupt finance in areas such as payments and messaging. They also have the potential to enhance the role of the CFO in everything from data management to decision-making. The cross-border payment landscape is changing radically with SWIFT’s global payments innovation (gpi) initiative and corporates are discovering the full potential of liquidity and transparencies with same-day clearing, tracking and tracing of payments. Financial planning and analysis has long been a core finance function, but, approached more strategically, it can open the door to the kinds of conversations that enable CFOs and their teams to contribute to growth.
2. Battening on cyber threats
Risk is inevitably a part of every CFO’s portfolio, and, these days, cyber risk is one form that has moved from a technology concern to a finance concern for several reasons. For one, the obvious impacts of a cyberattack on things such as compliance requirements, legal fees, and public relations are actually dwarfed by the often hidden impacts, such as the loss of intellectual property, increased costs of raising debt, and higher insurance premiums. So putting the right risk measures in place around cyber security is increasingly becoming a matter of deciding how much to invest in which forms of risk mitigation, and CFOs have increasingly been a part of those discussions.
Are corporates prepared to deal with cybersecurity threats?
Based on this paper that we have conducted with over 900 treasury executives, we have found that some corporates are better equipped with dealing with cybersecurity threats than others. In the paper, we found that a third of corporates who experience cyber breaches report monetary losses while nearly 20 percent also highlight a breach of client data. I encourage you to grasp a better understanding by going through this research.
What factors are the most important in incentivising corporates to observe compliance regulation?
This paper has found that corporates perceive that avoiding fines and penalties is the key incentive to observing compliance regulation. There is also great emphasis on protecting the reputation of their firms and ensuring data security at all times.
When it comes to sources of risk management advice, do corporates in Asia Pacific prefer to rely on internal expertise or external providers?
We have found that corporates across Asia Pacific are relying more heavily on external providers for risk management advice to get an impartial view of advisory. Corporates find that specialist advisers and vendors are much preferred over banks for external risk advice as they prioritise reputation and effectiveness over cost factors in external providers. We also see an upward trend in the importance of having an executive role for Chief Risk Officers across Asia Pacific companies.
How has the risk and compliance landscape changed in the last 5-10 years, and where do you see it going in the near future?
We have seen an increased compliance burden for corporates in the last 5-10 years and in the near future, as the number of governmental regulations increased and enforcement efforts gained strength, as industry and professional roles matured, and as the nature of business chines with increased participation in transnational operations. Needless to say, costs associated with the failure to comply have grown significantly and in the near future, we will see a wave of approaches undertaken by corporates to tackle this challenge. Navigating the bumpy road ahead of the national and international compliance landscape will require the development of new awareness and business skills across 3 primary areas at all corporations:
- Regulatory compliance: actions required by law, as well as the detection, reporting, and remedy of non-compliance;
- Risk management: the proactive identification and programming to address current and future obstacles that jeopardise compliance;
- Corporate governance: a heightened standard for the processes, customs, and rules defining how a corporation manages its business in the best interest of its owners and shareholders, with cyber security being a strategic priority.
To download the Risk and Compliance Index whitepaper, click here.