Risk management professionals and treasurers continue to focus on a variety of risks facing businesses in Asia and elsewhere. In its ‘Treasury Diagnostics Benchmarking Survey’, for instance, Citi says that it recently found that treasurers’ top risk management focus is on foreign exchange (FX), liquidity and counterparty risk. This was a global result, but with currency restrictions still prevalent in many Asian countries the FX finding is particularly relevant and recent natural disasters and western bank failures have made the latter two risks topical as well.
Compliance with risk management protocols is now a priority in many industries, as regulators seek to ensure that financial institutions and corporates alike manage future risks more effectively in future.
The priorities do, of course, vary country-by-country. In Japan, for example, SunGard claims to have found that Japanese firms are primarily concerned with managing FX risk exposure, followed by credit and interest rate risk. In some cases those firms’ practices may have room for improvement, as SunGard also found that nearly half manage credit risk with credit ratings data from an external information provider and that 26% manage credit risk internally on a case-by-case basis.
In China, JP Morgan says that its research shows that optimising working capital and risk management will remain the top priorities for treasury managers in China, as the economy enters into a slower but sustainable phase of growth. Credit and counterparty risk, the bank said, are still key challenges for treasury managers in China.
Sector-specific risks remain too across Asia. In shipping, for example, Jinhui Shipping and Transportation Limited both recently told ‘Seatrade Global’ said that “dry bulk ship-owners can expect greater risks of company defaults, counterparty risks and pressures on asset prices amid the continuing sluggish business conditions.”
Supply Chain Risks
The importance of the financial and physical supply chain has been reemphasised in recent years after the tsunami in Japan and floods in Thailand. Allianz, for instance, recently reported in its ‘Risk Barometer 2013’ report that natural catastrophes rank first as a business risk concern in Asia Pacific, and the supply chain risk is a close second. “The flooding disaster in Thailand showed that business interruption at a key supplier can cause a ripple effect that is felt across an entire industry,” explains AGCS property insurance expert, Volker Münch.
This ‘new normal’ state of affairs where volatility is common and risk assessments paramount, means that risk professionals and treasurers with risk skills in their cupboard are increasingly in demand. Strong technology support and reporting/monitoring capabilities are also important. In Singapore, for example, recruitment firm Robert Half said in its ‘2013 Salary Guide’ that it is seeing a surge in demand for risk and compliance experts, with strong hiring activity for risk and front office staff by Asian businesses. The driver of that demand, it said, is an explosion in new regulations across all industries, with those new regulations causing an unprecedented demand for compliance and finance experts. While the salaries of some roles have remained static, Robert Half says credit risk, compliance and risk management professionals can all command healthy increases in their salary levels this year.
Along with more focus on staffing, better technology is also vital. The IDC consultancy recently said it found that 62% of Asia Pacific banks expect rising technology budgets for risk management this year. Corporate clients could be the beneficiaries of this extra investment. IDC associate research director, Li-May Chew, said that “changing global dynamics call for executives to astutely manage their risk profiles to ensure that firms and financial institutions not only survive, but thrive in this ‘new normal’ environment. An environment where bankers have to deal with a climate of protracted slow growth and hyper competition.” IDC expects firms to invest the most in credit analytics, enterprise data management, enterprise risk dashboards and reporting technology, allied to skilled risk management staff.
While risk may not grab the headlines it once did, the new normal of risk management as well as growing regulatory compliance requirements means there’s a continuing strong focus on risk management across Asia Pacific.
The revised Payment Services Directive regulation, regarded as one of the most disruptive in Europe’s financial services sector, will begin to make an impact on January 13, 2018.
This year promises to further the regulatory compliance burden imposed on financial institutions. How are firms in the sector responding to the challenge?
The benefits of an in-house bank are increasingly evident, but some treasury departments still hesitate to take the plunge. This article offers a step-by-step guide.
While GDPR and Europe’s revised Payment Services Directive (PSD2) are not contradictory, the fact that the regulators and many banks work on them in silos is problematic, AccessPay executives argue.