Compliance complexities and challenges are on the rise at multinational companies around the world. There has been major shock to the economy and the work culture environment in the form of a global pandemic, things are never going back to the way they were, and new variables and risks are coming into the market as a result of what has happened in the last two years.
Compliance responsibilities have always been a big factor and an important role for CFOs at multinational companies but now they have to be extra vigilant and ensure that they get a handle on all of the new risks that are being presented to the market in this post covid world.
In this article we will take a look at some of the new compliance challenges facing CFOS, as well as how the old challenges have evolved with additional risks.
More regulation and administration
This will come as no surprise, as regulation and administration are key components of compliance mandates anyway. However, new laws are becoming more common especially in relation to financial services execution and control. The world has become more digital, digital payments technology has escalated hugely in recent years and it is becoming harder and harder to track who is sending money around the world and why. This leaves things wide open to fraud, corruption, and money laundering activities.
New laws are introduced on a regular basis in an attempt to reduce risk and curb criminal activity. It is the responsibility of the CFO and other senior finance leaders at the organization to keep pace with this regulatory change and liaise constantly with their colleagues in the legal department.
A new hybrid and remote working culture have also evolved: labor laws and regulatory activity is slowly catching up as companies and authorities do their best to put some structure, discipline, and control around this new working and business environment. There is a lot of compliance implications coming down the road for how to manage a geo dispersed workforce and global employees who are permitted to permanently work from home.
Furthermore, a key goal of a chief financial officer is to have a planned growth strategy and to always be expanding the business reach of the company. But with expansion comes new jurisdictions and also more compliance laws and obligations. This is even more relevant now with the new work from anywhere concept and having a global workforce. But for the CFO to successfully increase their organization's growth and global operations, then they must also be responsible for making sure that the company is still upholding all of their compliance obligations.
Cyber security
The CFO and surrounding finance department at any global company today cannot afford to operate with limited knowledge of digital and cyber security. It is a huge risk, and the press is filled on an almost daily basis with new stories about damaging data leaks, cyber-attacks, and ransomware attacks. Most companies take this matter very seriously as there is major risk of financial loss as well as huge reputational damage. On top of this, the company is likely to be subject to financial penalties from the relevant authorities.
The CFO will be the person who approves spending and investment on cyber security digital tools and security platforms to safeguard customer data as well as the internal processes that rely on digital tools inside the organization. The risks for breach and ransomware are everywhere inside the organization, pretty much every company in the world is run by a network of computers and IT infrastructure in some shape or form.
Therefore, it is crucial for the CFO and surrounding finance team to implement the right technology infrastructure within their company that is capable of preventing any data breach risks and that can facilitate a sufficient level of risk management. Discarding the use of any old legacy systems and instead prioritizing the use of SaaS technology, can help with the organizations cyber security responsibilities and initiatives. Finding and investing in the right security technology is a key role of the CFO and can have a huge impact on the company's privacy and security responsibilities.
As well as this, the financial services team inside the organization which falls within the remit of the CFO will work on an almost daily basis with sensitive and important financial information and data. This must be safeguarded and protected to the highest industry standards. No CFO wants to find themselves in front of the board explaining that they have been the victims of a cyber-attack and how the damage is widespread and devastating.
Cost management
New compliance responsibilities, new business risks, cyber security concerns, new regulation and administrative laws all add up to a collection of things that need to be dealt with. We all know that there is very little in the business world that doesn't cost money, so handling all of this in an efficient and effective way will require an investment strategy. It will likely fall to the decision-making of the CFO to determine which investments to make first and then have to manage costs over the long run.
There has been an escalation in costs associated with compliance in the past couple of years and all indications are that this cost is likely to rise significantly in the future as businesses need to invest in their compliance infrastructure, professional expertise, and internal processes.
Compliance is mandatory and non-negotiable, there is really no way around it. New businesses are entering the market offering software to help companies manage compliance, but it is not immediately clear who is offering the best product. The CFO and finance organization will need to liaise with compliance officers, the legal department, and in-house experts to help determine what is the correct investment to help the company meet its compliance obligations in the present day and for the future.
There is a cost management element to every CFO job and this person will be tasked with managing and sometimes reducing costs, but at the same time helping to grow revenue and increase market share across the business. Understandably, this is a delicate balancing act and one that is only becoming more difficult as costs associated with compliance management are growing steadily.
Upholding compliance obligations is always going to be a concern and top priority for organizations today, and meeting these obligations comes with challenges that are faced by many business leaders, including CFOs. Having a sufficient compliance plan is crucial for today’s CFOs- they must take the time to develop a thorough investment strategy to purchase the right software and technology that can help ensure that multiple compliance related challenges can be dealt with in a manageable and risk-free way.
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