Treasury Management Compliance in a New Regulatory Era

Regulatory risk is an ever-present, ever-changing part of risk management. Since 2008, however, we have seen a steep change in regulatory scrutiny as well as the costs and risks associated with non-compliance. Meanwhile, as corporations expand geographically, treasurers increasingly need to comply with multiple local regulations as well as international regulations.

This can create substantial resource overheads to understand the implications of new regulations, refining processes and controls, collating additional data and supporting new reporting obligations. That’s why treasury management technology is so important to companies’ success.

With enough forewarning, companies can plan changes in a systematic way. Rules can change very quickly, however. Previously oil-dependent economies in Africa are one example; Such countries are now struggling because they didn’t prepare for such risks.

In addition, there can be differences in interpretation and deployment across both countries and organizations. For example, know your customer (KYC) requirements are posing considerable challenges for corporate treasurers operating globally, as they struggle to cater for different information requirements and timing of these requirements by each bank in each market.

The issue companies must face is that no one element of risk is enough. Beyond regulatory risk, companies must understand and respond to the consequences of regulations where corporate treasury is indirectly exposed.

For example, failure to recognize, avoid and protect consumers and businesses from the risk of bank failure was one of the factors that led to the 2008-9 global financial crisis. Updating rules that had not been overhauled substantially since the 1930s resulted in Basel III, which banks are now implementing at a varying pace. Basel III has significant capital and liquidity implications for banks, which in turn impacts on the solutions, services and pricing that they are able to offer to their customers.

Understanding these changes, and working with banks and technology vendors to introduce new solutions in areas such as cash investment and liquidity, will be essential.

Treasury management technology is inevitably not a panacea to regulatory compliance, but it plays a vital role in enabling data to be collated and reported in the appropriate format, implementing processes and controls, and supporting new instruments.