Harness technology to navigate regulatory flood - Executives urge forward thinking at CFO Summit 4
Seven minutes. 300 million. $321 billion. Every seven minutes a new piece of regulation is introduced globally, the number of pages of regulation in existence and the number of dollars paid since the financial crisis of 2008. In an intriguing presentation at CFO Summit 4 at Summer Place in Sandton on Thursday, Thomson Reuters Africa MD Sneha Shah examined how the flood of regulation was impacting companies around the world and provided solutions for those that were struggling to cope with compliance.
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Sneha explained that the arm of the law was longer than ever before, with regulation belonging to world governments and regulatory bodies. Indeed, Hitachi, a Japanese company operating in South Africa, had been fined by the US Securities and Exchange Commission. The appropriate use of technology, a diverse workforce that included Big Data-era professionals like data scientists and behavioural analysts, not just accountants, and partnerships with other companies facing the same issues, were the keys to coming out in the clear, according to Sneha.
Thomson Reuters, a partner of CFO South Africa, provides professionals and organisations with the intelligence, technology and human expertise they need to find trusted answers. A multinational mass information firm, it aims to be the "surfboard on waves of change" and helps its partners to make informed compliance decisions with the technology to scan 100 million pages a day using intelligent tagging.
Following the presentation, Sneha was joined by Luvuyo Masinda, deputy CFO Corporate and Investment Banking at Standard Bank, for a roundtable discussion facilitated by CHRO community manager Didi Sehume.
"As a bank, we are very heavily regulated. Reflecting on the incidents we've had, there is a single thread that runs through them: having intimate knowledge of the people you do business with - clients and their businesses - means you are better able to flag unusual movements. In 2011, we experienced losses in regions where we didn't have a presence, and this led to a strategy adjustment. We now do business only in places where we have a presence and a deep understanding of the environment and clients."
He explained that the major challenge for Standard Bank was that in doing business across multiple countries, it had to understand different sets of regulations and comply with the highest standards. The bank had to think creatively and proactive in centralising to minimise costs and enhance competitiveness.
Sneha said the risks of non-compliance extended beyond the bottom line. "It's about understanding risks and planning ahead of time. Corporate gut checks are one thing, but they need to understand that level of risk is not just about the regulator, but extends to human impact. Corporates must think of their reputation. They could easily inadvertently be contributing to terrorism or modern-day slavery without access to information," she explained.
She added that corporates were often ignorant of the nuances of regulation and Thomson Reuters, which had entered into a revolutionary Know Your Customer partnership with Standard Bank, was making a concerted effort to coach them through cultural change towards transparency and engaging with regulators, while living the values it espoused.
Luvuyo said it was critical that company culture was not centred on the bottom line, but about human impact and a clear purpose, with management taking the lead in reiterating this. He advised guests to engage with regulators to influence policy and build a close relationship with central bankers, while using case studies of past failures to help employees learn more effectively.
Ultimately, building an efficient compliance programme and using technology to ensure adherence to the multitude of regulations made business sense, the Standard Bank CIB CFO said:
"Our clients want a seamless experience, with real-time transactions, while the regulator wants more assurance and some of our competitors operate beyond these regulations, so there is tension. Technology has to bridge the gap and sift through the data that flows through every second. It pains me to have to sign off on fines. The cost of not complying is very steep - certainly far more expensive than using technology to deal with it."