Companies are struggling to cope with the amount of regulation coming out of ASEAN economies. Successful navigation requires tapping into frameworks, technology and keeping up to date.
The amount of regulation coming out of ASEAN economies is enough to tie corporates in knots. Like new Bank Indonesia regulation on FX transactions or the Korean Financial Services Commission’s latest measures to improve corporate financial data infrastructure. China’s most recent regulation on RMB forward and option derivatives or the latest missive from State Bank of Vietnam on foreign exchange controls regarding offshore loans.
As the number of MNCs establishing businesses in countries like Vietnam, Thailand and Malaysia in China +1 strategies grows, being across the changing regulatory environment is increasingly important. Global companies are actively tilting supply chains to locations outside China and business and investment is flowing into China’s regional neighbours. Witness Apple’s recent move to diversify iPhone production from China to India. Being across the regulation becomes a vital element of cash management, and the ability to have cash in the right place at the right time without tripping a regulatory line.
There are three main regulatory issues that corporates and MNCs operating in Asia face of which complexity is the biggest challenge, explains Ankur Kanwar, Regional Head of Cash Management, ASEAN, and Global Head of Structured Solutions at Standard Chartered Bank in Singapore.
“The regulatory landscape in Asia is complex as it varies widely across regions and countries with currency restrictions and fast evolving customer behaviour making it a unique and challenging environment. Adding to the complexity is the increasing protectionism trend with regulators mandating the use of localised platforms and local currency billings.”
He also flags the accelerated pace of regulatory change driven by dynamic growth and evolving business models. Examples include fast-changing efforts to simplify FX and repatriation guidelines, and the rules for new business models such as e-wallet providers. Thirdly, cyber risk is adding to the complexity – and the regulatory burden as governments put in place new cyber security laws to keep pace with the roll out of digital solutions.
How should companies prepare? Kanwar advises corporates to see regulatory frameworks as an advantage. “Having a clear regulatory environment removes uncertainty and ambiguity and allows businesses to transact confidently. Corporates must ensure clarity of guidelines and execute business confidently.” One example he cites includes Singapore’s Payment Services Act (PSA) which provides guidelines for corporates launching stored value facility (SVF) solutions. “It has supported a large growth in e-wallet related solutions in Singapore,” he says.
Corporates should also lean on technology to meet regulatory guidelines where feasible. Tools such as machine learning, big data and APIs are being used for digitising processes and documentary checks and to execute rules-based actions in line with changing regulatory requirements.
Staying up to date with regulatory changes is another must. “It can be overwhelming to track regulatory changes across the region and also understanding implications on each one’s business,” he says.
And he believes corporates getting it wrong will hinder their growth. Corporates not taking advantage of new regulatory updates could see a slowdown in business versus competitors who are updated with new guidelines and are changing processes on a timely basis. Elsewhere fines, penalties and reputation pose another risk. “Regulatory scrutiny resulting in fines and penalties may also cause unnecessary stress to corporates.”
