Keeping up with regulatory guidelines can often feel like an uphill battle. All it takes is a new law or regulation to kick in to throw you off your compliance game.
Hari Ganesh Kumar is the Direct Tax Enterprise Proposition Lead – Corporate at Thomson Reuters Asia & Emerging Markets. Conscious of how organisations may be adapting to the onslaught of regulatory developments in 2020, Hari invited two speakers to join him at a recent Thomson Reuters’ Return to Better virtual conference:
- Wilson Ang, Partner & Head of Asia Regulatory Compliance and Investigations Practice at Norton Rose Fulbright and
- Tony Fulton, Partner at RSM Australia.
We’ve recapped the panel’s five top tips to help you overcome regulatory burdens. Whether you are a compliance officer or chief legal counsel, read on to stay across the latest compliance issues…
1. Secure your organisation’s financial position
While Tony Fulton has over 25 years’ experience within the tax and financial services sector, there was no way he could’ve predicted the impact that COVID-19 would have on organisations.
“Very few of our clients saw this coming, so it has certainly been a situation where our clients have not had the opportunity to prepare for what’s occurred, and particularly the speed at which it has happened,” he said.
Tony noted however that the severity of the impact on organisations usually depends on the business type. Many businesses who have experienced disruption to continuity have now entered ‘survival mode’.
He said that the focus for these organisations is not necessarily about growth, but rather an effort to retain resources and secure their financial position to get through the pandemic.
On the other hand, there are organisations, particularly those in the technology sector, which have been impacted “to a lesser degree”, as the pandemic has sparked an “accelerated push toward the adoption of technology”.
“For many technology enterprises, [the pandemic] has provided a tailwind for growth, accelerating the realisation of go-to-market objectives due to much stronger uptake of digital solutions across industries.”– Tony Fulton, Partner at RSM Australia
“If you’re a company with a steady cash flow, and you can self-fund your activities, then you’re more likely to see a pathway through the crisis and hopefully a market environment that enables you to thrive on the other side.”
2. Know your entitlements (but ensure you comply)
Another tip Tony provided was that organisations stay across the concessions and stimulus measures available to them. This can ensure “they’re in a position to survive and thrive in the new environment”.
In addition, Wilson called out the various risks being amplified due to supply chain disruption, such as fraud, corruption and misconduct.
“In the current environment that we are in, there are certain risks that are heightened. In order to fulfill contracts, parties need to shift the sources from which they obtain their products and services. In doing so, they may be tempted to resort to non-compliant activities,” he explained.
Wilson added that because many organisations have an increased focus on achieving financial objectives and hitting performance targets, employees may be tempted to conduct corrupt transactions or indulge in fraudulent activities to make it appear as though an organisation is performing well.
3. Engage with regulators constructively
Although interactions between regulators and clients can vary, Wilson said that one commonality between regulators is their receptiveness towards, and investment in understanding the rapidly evolving technology landscape.
“I think the circumstances have led [regulators] to be a bit more comfortable with using technology. So these adjustments have been made and adaptive guidelines have been implemented and shared as well,” he said.
But despite this degree of relaxation amongst regulators, Wilson advised organisations to not use this as an excuse to ignore risks.
“Constructive engagement with regulators should continue. Nonetheless, efforts and initiatives to mitigate risk should continue unabated as well,” he warned.
From Tony’s perspective, he’s noticed that following the introduction of stimulus packages, clients have been more inclined to ensure their compliance program is up to scratch, as receipt of financial assistance was predicated on organisations having an up-to-date filing position.
“Clients realise that beyond this they’ll need to make sure they continue to comply as necessary with their obligations and are inclined to make sure they come out of the crisis, in good shape without further problems,” said Tony.
Related reading: Supply chain management and handling disrupted supply is a key consideration we have not covered in this feature article. If this is what you’re after, catch up on the latest supply chain trends here.
4. Not on the cloud? Take opportunities to innovate
Most organisations rely on technologies to support compliance operations. But for many, COVID-19 has business leaders reassessing their level of investment.
“What we’re seeing here is a continuation of a strong trend that’s been running for a number of years, where our clients are looking to further leverage technology to power processes and ensure regulatory compliance,” said Tony.
With data protection remaining a key concern and remote working likely here to stay, it’s easy to see why compliance teams would increasingly turn to cloud-based technologies to support them.
“If people weren’t convinced of the merits of cloud-based technology previously, that’s certainly been driven home now. I don’t think anyone would consider a solution that wasn’t cloud-based going forward,” Tony added.
Tony also posited that workflow management and solutions which enable workforce collaboration are also expected to surge in popularity.
5. Protect data and stay cyber secure
Wilson reminded organisations that while tapping into the latest forms of technology is key, it is imperative to be cognisant of the data breach risks.
“One should never lose sight and vigilance in terms of compliance. Cyber-attacks, cyber scams, fraud and corruption are always there, and in fact, may increase in terms of the opportunities being presented to fraudsters.”– Wilson Ang, Partner & Head of Asia Regulatory Compliance and Investigations Practice at Norton Rose Fulbright
Tony suggested that organisations use the pandemic as an opportunity to lift their game.
“Look at these circumstances as perhaps not being the new normal, but an acceleration towards a different way of working, and the need to invest in systems which enables people to continue to work remotely and collaborate online in a secure way,” he said.
Different ways of working remotely was explored in another Return to Better conference session, dubbed “Remarkable Adaptability” – How the World has Adjusted to Working from Home.
The themes we’ve outlined so far are echoed in the Thomson Reuters’ 2020 Cost of Compliance Report. According to the report’s survey results, keeping up with regulatory change, budget, resource allocation and data protection are the top three compliance challenges for organisations in 2020.
However, given that there’s no way to determine if the world will return to what it once was, what will the future hold for organisations around the globe?
Wilson foreshadowed that many organisations may engage in misconduct or fraud, prompting regulators to become more aggressive in their compliance enforcement.
“I see governments taking a much more interventionist stance. I think the market has been viewed as being incapable of being left to its capitalist tendencies, not least when issues of public health and safety, infectious diseases and even opportunistic behaviour are concerned, particularly given the long-term consequences with sometimes socially detrimental consequences.”– Wilson Ang, Partner & Head of Asia Regulatory Compliance and Investigations Practice at Norton Rose Fulbright
Tony on the other hand envisages a further evolution in the interaction between organisations and their regulators.
“I think there’s a fair degree of goodwill between both governments and organisations about the need to work together, as far as the recovery is concerned. But that will require some significant resetting of the policy positions, particularly in the regulatory and tax arena,” he said.