Regulation & Standards

Question Answered: Keeping up with a fast-moving regulatory environment

Published: Jul 2019
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This issue’s question

“Constantly changing regulations across the larger Asian markets present a big challenge for APAC treasurers. How can corporate treasurers manage to keep up to date with them consistently?”

Rocky Mui, Partner, Clifford Chance

Rocky Mui

Clifford Chance

Regulations are paramount. Regardless of your seniority or experience, if you are not up to date with the relevant regulations, you are at risk of providing incorrect advice to your clients (internal or external). This principle rings particularly true in the corporate treasury and banking space in Asia Pacific, where there are constant regulatory updates.

Indeed, the frequency of regulatory change across Asia is so high, and variation in rulebooks between countries so marked, that as a region it presents treasurers with special challenges versus other geographies. How can APAC-focused treasurers ensure that their regulatory knowledge is consistently topped up so that they are able to assess the impact of changes on their organisations and develop appropriate responses?

Subscribing to circulars from regulators is a must. Regulators provide frequent updates and are the most reliable source. Signing up for news and circular alerts from the relevant regulators vie email is simple and effective and an essential first step in ensuring a solid platform for dealing with ever changing rulebooks.

Materials and online services from law firms can be very valuable. Various law firms often provide useful regulatory intelligence in the form of alerts, newsletters, client briefings or host talks that summarise and interpret the updated regulatory position covering various jurisdictions. Their interpretations are often informed by their own participation in consultations with their respective local regulators, industry groups or clients. These materials and talks provide an inside view into developments in local regulations.

International firms, such as Clifford Chance, also operate comprehensive online portals which provide access to thought leadership publications on a cross jurisdictional basis, reflecting timely insight and views on various regulatory topics.

Keeping all the circulars and materials in one place is highly advisable. A practical tip on this front would be to keep a depositary of all the circulars, published materials and updates (by topic) you receive from regulators and law firms. We all know how cluttered an email inbox can get, and keeping a centralised database containing all these updates will make your life much easier when you need to revisit these materials.

Engagement with industry bodies can be very fruitful. We advise treasurers to try to get involved with the various bodies that are active in the industry, whether this be in a formal, consultative process or in a more informal, social context. Either way, you will get valuable insights into what these bodies (including peers within these bodies) think about the current regulatory landscape and upcoming regulated changes.

Lastly, always try and make time for regulatory consultations as they are issued. Looking out for and then engaging with regulatory consultations will really help you anticipate any regulatory changes and prevents you from being wrong-footed by any new regulations that may be in the pipeline.

These are the main tried-and-true methods to keep one consistently updated of, and prepared for, the ever-changing regulatory landscape of Asia Pacific and beyond.

Anton Abraham, Treasury Advisory Executive, Global Transaction Services, Bank of America Merrill Lynch

Anton Abraham

Treasury Advisory Executive, Global Transaction Services
Bank of America Merrill Lynch

New currency rules in Thailand, extended cut-off times for India, and amended reporting requirements in China; such diverse regulatory changes are all in a day’s work for treasurers operating across Asia Pacific.

This region consists of both free and highly regulated markets, some countries are opening up and reducing regulatory barriers while others are tightening or continually changing. The region’s regulatory flux presents treasurers with numerous challenges and they need to be equipped to keep abreast of these changes and prioritise those that may have an immediate impact on day to day operations.

Once identified, it is important to evaluate several methods to manage the regulatory change and select an approach that will minimise disruption and maximise benefits. For example, changes previously put on cash pools limiting liquidity outflows from China led to challenges in managing daily cash pooling of funds cross border into regional pools. This amendment required treasurers to think of alternative liquidity and funding solutions to ensure they were able to fund the business effectively.

Regulatory changes can affect multiple areas of a company’s treasury operations, including financial reporting, liquidity management, commodity risk management and foreign exchange hedging programmes. There are several methods that treasurers can employ to understand the impact of regulations on their business operations.

For countries such as India and China, often the preferred approach is to have local treasury staff on the ground to engage with local regulators and banks and understanding the requirements with respect to completing or filing documentation associated with transaction activity. These local experts are also well positioned to better understand implications and requirements if changes are unclear, which can often be the case in Asia.

Another approach is to ensure treasury nominates a point person to work closely with legal and other operational areas of the business to understand and analyse changes to regulations and how these changes may impact operations. This person would then work with any local business, IT, treasury or finance staff on potential process, technology or reporting changes that may need to be implemented.

Tax advisors, banks, lawyers and big four consultants are also a good source of information. But the challenge then for many treasurers is interpreting the information and how it relates to changes they may need to make to ensure compliance.

Managing regulations is all part of the challenge for treasurers across Asia and the best way to keep up to date is to ensure continuous engagement with banks, advisors and local treasury associations or peer groups to understand the implication of these changes and how they may impact your business.

Lawrence Tsi, Head of Accounting and Tax (APAC), TMF Group

Lawrence Tsi

Head of Accounting and Tax (APAC)
TMF Group
Kenneth Lee, Director, Head of Corporate Secretarial Services, Hong Kong, TMF Group

Kenneth Lee

Director, Head of Corporate Secretarial Services, Hong Kong
TMF Group

In today’s ever-changing regulatory environment across APAC, coping with changes requires a two-step approach. Firstly, treasurers will need to monitor and identify all the relevant current and prospective regulatory changes. Secondly, they need to work with stakeholders to assess how all the relevant changes will affect the organisations’ business model and compliance framework, and thereafter, prioritise the relevant requirements based on the extent of impact and timeline.

To execute the steps above, treasurers should regularly engage with financial institutions and consultants. In many countries within APAC, regulatory changes are often implemented quickly with nil to limited guidance immediately available and varied significantly across different regions and jurisdictions. To navigate through the complexity of these changes, seeking regular compliance updates through first-hand interaction with banks and accredited consultants (and through subscription to their regulatory updates/newsletters) will be important, as regulatory authorities would typically consult or engage these parties in formulating and interpreting these regulations.

Treasurers should also look to form a multi-disciplinary focus group or taskforce within their organisation that monitors and manages regulatory changes holistically. Identifying regulatory changes is not the sole responsibility of the treasurer, instead, it requires collaboration with the other functions within the organisation, including compliance, finance, legal departments, and the management team in the relevant jurisdictions.

Moreover, many of the major regulatory changes in the last 12 to 24 months (such as GDPR, AML/KYC regulations and IFRS 9) have had a pervasive impact on organisations and their effects were not only clearly felt by treasury, with significant impact on many other functions within the organisation. It is therefore critical for treasury to work closely with other functions to ensure that regulatory updates from a broad range of disciplines are appropriately identified and assessed so that all material and relevant changes to the organisation are identified on a timely basis and the organisation is addressing such changes with a comprehensive approach (not siloed).

Treasurers should stay close to the latest regulatory developments and seek best practice from other corporates by attending the most relevant gatherings. Hundreds of business conferences are held each year and attending some can help provide the perfect platform for industry participants to not only obtain technical information but also share information regarding best practice and lessons learnt from addressing these regulatory changes. In addition, speakers at these events can sometimes be members of the regulatory authority, meaning there is an opportunity for treasurers to provide first-hand feedback to the authorities.

Do not underestimate the impact technologies can play in compliance. As noted previously, coping with regulatory changes is a two-step process. Technology plays an important role in the second step by enabling an organisation’s data to be collated and reported in an informative manner that helps assess its compliance readiness and quality of compliance reporting. Whilst it is understandable that treasurers focus on the “nuts and bolts” of the regulatory updates, they should work with their focus group to evaluate whether the organisation’s technology and controls are fit for purpose as regulatory reporting is only as good as the data assembled.

Next question:

“How should treasurers go about deciding on a fintech or a bank as a service provider?”

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