Insight & Analysis

Effectively managing compliance challenges

Published: Jan 2017

Compliance has long been an area of concern for corporate treasurers. However, the recent wave of new regulation has made this area more pressing – and challenging – than ever before.

While compliance is a challenge for treasurers around the world, the nature of those challenges, and the way in which treasurers address them, varies considerably between companies. Significant regulatory topics include Basel III, Dodd-Frank, tax compliance, EMIR and the introduction of IFRS 9.

Where the securities space is concerned, Ruth Wandhöfer, Global Head of Regulatory and Market Strategy at Citi, says that MiFID II could lead to some compliance challenges for large corporates that are very active in the trading business. She adds that another key pain point is the Know Your Customer (KYC) account opening process, which is highly paper-based.

Tackling compliance

While there are many areas of compliance to consider, not all companies are affected in the same way. As David Stebbings, Director, Head of Treasury Advisory at PwC explains, “Corporates do not only need to understand their own compliance requirements – they also need to understand how different regulations affect their banks and their financial services providers.” Compliance challenges will also vary from market to market.

Nevertheless, Andrew Bateman, Head of Treasury, Payments, Receivables Solutions at FIS points out that the treasurers addressing these challenges have one thing in common: resource constraints. “Finding domain expertise and maintaining a trained team has never been more challenging,” he says. “Because of these resource constraints, staying up-to-date with frequent post-recession changes in the regulatory environment has been all the more challenging.”

Different companies are addressing these challenges in different ways. Bateman observes that some treasurers of large corporates have staffed up in order to help manage regulatory changes. Meanwhile, Jason Marsden, Head of Client Solutions – TPS International at Standard Bank says that real time liquidity visibility and management can play a critical role in managing some of the compliance challenges faced by treasurers, “enabling the treasurers to be more agile in their approach to treasury management.”

Regardless of the chosen approach, it is important for treasurers to understand what they are up against. “Treasurers have to have an understanding of the regulatory landscape, as well as the right treasury technology and resources required for process reengineering, where necessary,” says Bateman. “Without any one of these, treasurers are more likely to lose sleep at night.”

The role of technology

Bateman says that treasurers need resources to achieve compliance, including treasury technology and input from third-party experts/specialists such as consulting partners, banks and treasury technology providers. He explains, “Our role at FIS has changed over the years from just a technology provider, to more of a consultative partner. Treasurers are expecting us to not only deliver technology, but also to help navigate the regulatory and compliance environment, both through the technology solutions themselves and through advice and thought leadership.”

Meanwhile, treasury management system providers are working to support treasurers in meeting their compliance requirements. “While compliance challenges continue to evolve, treasury technology enables even small treasury teams to be more strategic,” says Bob Stark, VP Strategy at Kyriba. “This allows them to get beyond basic compliance and contribute to business performance such as reducing cost of goods and services by optimising cash flow hedging programmes.”

Wandhöfer notes that technology innovation is also starting to focus on elements of RegTech, where innovation aims to help banks and increasingly, corporations, navigate compliance challenges by allowing for more automation of data feeds and data reporting.

Looking forward

As the regulatory environment continues to change, new compliance challenges are emerging. As such, treasurers need to continue monitoring this area, introducing new solutions and strategies as the need arises. For example, Bateman says that he expects cybercrime to be a greater area of focus and responsibility for treasurers, due to the rampant cyber-attacks of the past two years.

“We expect treasurers will continue to feel the squeeze on resources as well,” he concludes. “It’s our job as a technology and consultative partner to stay ahead of the regulatory curve, in order to help our clients better navigate the regulatory and compliance landscape.”

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