Risk managers weigh in on the impacts of regulatory reform

The impacts of regulatory reform on businesses differ widely, and largely depend on the location and industry that a firm operates in.

However, more than half of respondents (55.77%) to the StrategicRISK regulatory risk survey said that regulatory reform over the past 12 months had increased their compliance costs.

A further 28.85% said they had to adjust certain product lines and/or business activities as a result of regulatory reform, while 9.62% have had to maintain higher capital.

Commenting on the results, Deloitte Southeast Asia financial services industry leader Ho Kok Yong said he was not surprised that an increase in costs had come up as the top result.

He said awareness of regulatory compliance had intensified in the past 12 months alongside a marked boost to company investment in compliance.

“In this part of the world there is a lot of job cutting going on, but in terms of regulation and compliance they are still hiring. You have to keep investing resources to keep up with regulatory changes,” he said.

But this increased investment doesn’t need to be viewed as a bad thing, Kok Yong said.

“Sometimes it can also give added benefits to business. For example, more regulatory compliance generally means collecting more data, and some of the banks are actually using this information and churning it up to understand more about their customers and using that for their marketing, business and risk purposes.”

Willis Singapore executive director Alex Thoms agreed that regulatory reform in Asia-Pacific should be viewed as a positive thing for businesses and the economy.

“A lot of regulation is intended to protect consumers, our financial systems, the environment and so on, so it’s hard to argue that these are negative things,” he said.  

“Having said this, regulatory reform does, in my view, need to be implemented in such a way that it doesn’t hinder the competitiveness of Asian companies, stifle innovative thinking, or impact inwards investment.

“Asia is very much a growth engine for the global economy, even if the levels of growth are reducing a little.”

InterContinental Hotels Group risk manager, greater China, Keith Xia said tightening regulation around compliance, anti-bribery, data privacy, food safety and product recall were taking up an increasing amount of risk managers time.

“Many companies now need to be more careful about local compliance,” he said.

“In a global context, many companies need to follow the regulations of different countries. This also makes regulatory compliance more difficult.”

But he said risk managers can contribute to a company’s growth in the face of tightening regulation in a number of ways:

• Risk due diligence and taking consideration of the regulatory landscape to provide the company with a better understanding of its risk profile.
• Establish a robust risk framework to monitor and control the regulatory risk. Enforce compliance and establish risk awareness and risk reporting.
• Lobby policies with government authorities in advance, either via your company or an industry association.