Most APAC Organisations are Unprepared for Regulatory Changes They are aware of the compliance rules but unsure of how to address them
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In the past five years, many countries have adopted new rules and requirements in a bid to improve global financial transparency. As a result, compliance responsibilities for Asia‑Pacific (APAC) organizations have increased manifold. But these entities are struggling to keep up with new compliance rules.
According to the "Facing the Future: Developing a Response to Regulatory Change", a report jointly released by the multinational professional services TMF Group and Asia Risk, a source of news and analysis on risk management, derivatives and regulation, more APAC countries are signing up to global initiatives such as the Organisation for Economic Co-operation and Development-led Common Reporting Standard (CRS) and the Base Erosion and Profit Shifting Project, and regulations from other jurisdictions, such as the US Foreign Account Tax Compliance Act and the European General Data Protection Regulation.
In a survey of over 100 senior legal and compliance professionals across the Asia-Pacific region, however, the study found that almost 40 per cent of respondents see changing local and global regulatory requirements as a major challenge. Almost 60 per cent did not take any action in 2018 to adjust to regulatory changes, and do not currently have any actions planned for 2019 (62 per cent), the report says.
The findings show that many businesses are struggling with the volume and pace of change. When asked to rate on a scale of 1-10 their confidence in their organization's ability to remain compliant in 2019, more than one fifth of respondents rated their confidence five or less.
"In recent years APAC businesses have had to deal with a huge array of new regulations. Most firms are only now becoming aware of the size of the challenge they pose – but not all have yet managed to adapt. This is a crucial issue for the region's companies, as failure to comply can have seriously detrimental consequences," says Leila Szwarc, global head of compliance and strategic regulatory services at TMF Group.
Understanding the underperformance
This is potentially down to resource allocation conflicts or strategies that fail to integrate compliance, says Szwarc. "We do not know of any companies that are unaware of the compliance and regulation requirements, but some are slow to adopt them due to the level of change they bring," adds Robin Yoo, director and deputy head corporate secretarial at TMF Group's Singapore office.
Another reason for the delay is that implementing these regulations takes time as it involves amending local laws and creating guidance, procedures and other supporting tools to enable success. "Many of these countries are experiencing the first reporting period and will only be able to look back after a couple of years to understand how prepared they were at that moment," says Szwarc.
She points out that, for a fast-paced, rapidly evolving market such as financial services, such figures reveal a high level of "stagnation". "We wonder how the thought of being well prepared as an organization marries with the lack of readiness shown in the results, which would enable them to succeed with their compliance requirements," she says. Mao considers it "a wake-up call", requiring swift action. "Organizations should have a game plan ready to address what's coming in the years ahead," he adds.