Good governance is good for business, was the underlying message of the Master Class hosted by Dr Kerry Jenkins, head of the Regulatory and Compliance unit at KPMG, at the CFO South Africa Event Risk, Compliance & Control Forum at the Cape Town Club last week.
Dr Jenkins said given the plethora of laws, regulations and a number of pending changes , it was easy for a CFO to feel overwhelmed by what that they were now expected to know. "The changes happening in regulations are unprecedented. Since the beginning of the year there have been at least 30 acts passed at a national level. If you look at the number of acts passed since 2013, there have been over 70 acts passed since January 2013 to July 2014. This followed the 78 acts passed during the previous three years."
She said though there was a lot of pressure on CFOs to adhere to regulations in an increasingly complex environment, complying with what was expected of them should be seen as an opportunity for a company to get an advantage, rather than as burden that would hold it back. Some companies have already developed business models that did just that. An insurance group for instance, was charging premiums based on driving behaviour. By getting its clients to behave in a law abiding way, it was reducing the chance that a claim would be made against it.
Dr Jenkins warned that the cost to a company could be severe if it was dismissive of the need to stay within the law. "The risk and consequences of noncompliance are extreme ranging from fines and penalties to 'loss of license to trade' and reputational damage as has been seen in several sectors including the banking and construction industries."
Dr Jenkins noted that the slowdown in the economy had made it difficult for governments to collect enough taxes to meet their spending priorities. It would not be unfeasible for cash strapped governments to fill their coffers by getting their well resourced regulators to penalise businesses with hefty fines for breaking the law.
Businesses who were committed to compliance had to ensure that it was underpinned by an ethical culture, which was led from the top of the organisation. This also required accountability and consequences for non-compliance. Ideally compliance needs to be built into the business processes supported with comfort from assurance providers that everything is operating legally and efficaciously.
Several people attending the class agreed with Dr Jenkins that good governance was good for the bottom line and that South Africans were starting to take governance and compliance seriously. One of the attendees, working for a large financial services company said "I think there has been a positive change. I remembered 10 years ago when I joined my organisation, it seemed as if the compliance department looked after everything, now us as managers are more accountable. The primary role of the compliance department now is to provide the guidelines and to monitor. Our role as managers is to enforce these guidelines."
The slides of the presentations made at the CFO South Africa Master Class by Kerry Jenkins can be accessed here below:
- Master Class Risk, Compliance & Control - by Kerry Jenkins, Par...
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