For long-term business success and credibility, regulatory compliance is crucial. But shifting regulatory landscapes pose a significant challenge to Asia-Pacific (APAC) businesses looking to grow throughout the region. Modern multi-country companies must ensure their compliance frameworks address the specific mandates and expectations of each jurisdiction in which they operate.
In this article, BoardRoom’s Group Director, Legal & Compliance Ai Min Lim and Hong Kong Compliance Director Davis Lau explain how businesses can take strategic action to ensure their compliance practices are aligned with the expectations of regulators, clients and partners. We will also explore the importance of building an internal compliance culture and choosing business partners that share your vision for strong compliance.
Regulatory requirements in the Asia-Pacific region
Following recent high-profile financial crime cases and the economic disruption of COVID-19, regulators across APAC are under mounting pressure to promote good governance and fair competition in their respective economies. Compliance requirements continue to change, making adaptability crucial for businesses operating across borders.
“The regulatory landscape is evolving, with companies now facing escalating regulatory demands,” says Davis Lau.
The main types of compliance
In the Hong Kong business world, compliance can be broken down into the following three categories:
The local laws or ‘ordinances’ that companies must fulfil to operate their businesses (eg. anti-money laundering laws)
The standards and rules that govern how laws are enforced (these are enforced by administrative bodies and often have the same force as laws)
Good governance practices that are strongly encouraged by regulators but not required under law or regulation.
To continue operating and avoid penalisation, companies must comply with all relevant statutory and regulatory compliance requirements. However, the Hong Kong compliance agenda is now evolving beyond basic compliance to incorporate broader strategic issues, prevalent within the third category – corporate compliance.
Companies that take a holistic approach to compliance by pursuing all of the above categories with equal dedication will earn increased trust from their stakeholders, leading to greater competitive advantage.
Strategic compliance starts at the top
Taking a strategic approach to regulatory compliance will ensure your business not only meets but exceeds its governance goals. According to Ai Min Lim, one key strategy is to make sure your company’s compliance efforts start from the top.
“Management must recognise that they have to put resources into compliance and invest in it, because it’s not just ‘good to have’ — it’s absolutely crucial to protect the business,” she says.
Compliance cannot be driven by the Compliance Department (or equivalent) alone. It is the responsibility of the management team to set the tone and ensure that compliance is part of the company culture. The importance of compliance and the messaging around it must cascade down to staff across all levels to ensure uniform practice across the organisation.
Every member of an organisation, from the mailroom to the boardroom, needs to work together to achieve compliance. It is not just a process or policy on paper, but something that is operationalised and its importance understood at all levels of the organisation.
Build a culture of compliance
To create a compliance program that goes beyond ‘checking the boxes’, leaders need to start dismantling outdated perceptions of compliance as a burden.
Corporate workers are generally very busy with competing priorities. So with changes to regulations having a direct impact on day-to-day processes, it can be challenging for people to see compliance as a valuable part of business.
Key ways to cultivate an appreciation of regulatory compliance include:
Once you have secured buy-in from all staff, your company’s risk of misconduct and subsequent penalisation will dramatically reduce.
Common challenges of compliance
All businesses in Hong Kong, no matter their size or industry, face similar obstacles in the pursuit of regulatory compliance. As the first step towards your compliance vision, it is important to identify these common challenges and explore how they might impact your organisation.
Keeping up with evolving requirements
According to a 2022 Regulatory Outlook report by Deloitte, the changeable nature of corporate rules across APAC means it will be increasingly difficult for organisations to maintain standard internal controls and processes. Relying on regulatory compliance management software alone is no longer an option.
For example, a new inspection regime is coming into effect under the Companies Ordinance for Protecting Personal Information. The mandatory regime applies to Hong Kong companies and registered non-Hong Kong companies (including listed companies) that must now take a number of time-sensitive actions to meet the new requirements.
To maintain ongoing compliance, companies must predict how emerging regulations may impact not only their compliance processes but also their business models and strategic direction. On top of this, they must correctly interpret the meaning of new laws, which are often expressed in complicated legal speak.
There is no one-size-fits-all approach
With local requirements varying greatly depending on the size, industry and location of your business, compliance is usually not a straightforward task.
“Compliance for a startup and compliance for a multinational corporation are very different concepts,” says Davis. This means there’s no single framework, roadmap or workflow tool available to make compliance easier. Its nuanced nature requires a tailored solution.
Fortunately, Hong Kong recognises that companies require some flexibility to implement the best governance practices to suit their circumstances. For example, while publicly listed companies are expected to comply with the Corporate Governance Code, they are allowed to deviate as long as they can provide considered reasoning in their annual report.
How to stay across regulatory changes
From setting the vision, devising the strategies, providing relevant training and then reporting on results, regulatory compliance requires significant resources to be effective.
Partnering with experienced providers across all business endeavours takes the guesswork out of responding to complex rules and regulations. Ultimately helping your staff understand their directive and potential implications. Plus, they can help you make strategic compliance decisions that align with changes in corporate governance and other regional-level activities.
Start implementing strategic regulatory compliance today
Strategic regulatory compliance benefits your business in several crucial ways. It protects you from reputational damage and hefty fines and promotes positive relationships with key stakeholders (including customers, staff and regulators) that will propel your business towards its goals.
Contact us to speak with a local expert about regulatory compliance in your organisation.
Related Business Insights
29 Mar 2023
Great corporate governance starts with a skilled company secretary
Elevating your corporate governance in Hong Kong can help you remain compliant and retain skilled employees. Ensure …READ MORE
29 Mar 2023
Make the transition to outsourced accounting services to grow your business
Outsourcing your accounting services can help support a successful growth journey for your business. Find out how t …READ MORE
21 Mar 2023
Hong Kong 2023-24 Budget
As Hong Kong enters the post-pandemic era, the Hong Kong 2023-24 Budget laid out the plans and measures for pursuin …READ MORE