Compliance is a hot issue in the GCC. As an emerging economy, the region is working hard to conform to the internationally recognised standards, practices and regulations of more mature trade partners. GCC governments and business leaders know that compliance is the key to greater access to the global economy.
For CFOs, the flurry of new regulations witnessed across the GCC implies new ways to do business and run the finance department.
Compliance, a gateway to global trade
Faced with a significant drop in hydrocarbon revenues, economic diversification has become a priority in GCC countries.
GCC states simply have no other choice than to shift course radically if they are to generate revenue from other sources, it added. To create an equal playing field in international trade, businesses need to adopt global standards. This is why compliance, anti-bribery and anti-money laundering regulations have become top priorities for businesses across the GCC.
Yet according to a client survey by publisher Legal500, 88 percent of businesses in the region will struggle with compliance in the next 12 months.
Global standards and best practices
Businesses in the GCC have, over the past few years, started to adopt International Financial Reporting Standards (IFRS). Created by the International Accounting Standards Board, these standards aimed to be applied on a globally consistent basis by developed, emerging and developing economies.
The objective is to give investors and other users of financial statements the ability to compare the financial performance of publicly listed companies on a like-for-like basis with their international peers. Two-thirds of the G20 use IFRS.
In the UAE, adoption of IFRS Standards and the IFRS for SMEs Standard became a legal requirement for businesses as of 2015, while in Saudi Arabia, the Capital Market Authority asked the nation's 175 listed companies to adopt IFRS from the start of this year.
However, for businesses, adopting these new standards and practices is no mean feat. IFRS implementation can have a significant impact on a business organisation and may involve changes to enterprise resource planning (ERP) and accounting systems.
Meanwhile, another significant change is on the horizon with the impending launch of VAT in the region. Both UAE and Saudi authorities have indicated that VAT will be introduced from 1 Jan., 2018. A 5 percent levy will apply to goods and services, which will definitely require businesses to review their ERP and compliance systems.
Risk of compliance fatigue
FATCA, Basel III, IFRS 9, MiFID II, AML - the current raft of new regulations unleashed on the region and that have to be implemented before 2018 is adding further pressure on CFOs, already battling with IFRS, VAT and a generally difficult business environment in the region following the slide in oil prices.
A Deloitte survey titled "Financial Crime In The Middle East And North Africa 2016", in partnership with Thomson Reuters, notes that there were 8,704 regulatory alerts in 2008. In 2015, the figure jumped dramatically to over 43,000 alerts, equivalent to one every 12 minutes.
"It is no surprise, therefore, that while last year the most pressing concern was maintaining training and awareness, followed by securing support from management and the increasing costs, this year's top concern is coping with regulatory updates," the report says.
The Deloitte survey warns against 'regulatory fatigue', which it believes can result in paralysis. "Whilst it may be understandable in the face of a regulatory avalanche, it is not an acceptable defence," the firm points out.
To win the regulatory compliance challenge, CFOs should arm themselves with technology that can increase automation, transparency and protect sensitive data and give them a real-time, at-a-glance view of the firm's performance, assets and workflows.
© Oracle 2017
