SINGAPORE – Regulatory compliance issues and a lack of secure business communication processes are among the key challenges in corporate governance faced by companies operating in Asia-Pacific, according to the latest results of the Thomson Reuters and EY 2014 Governance Survey.
The Reuters’ report surveyed employees from the governance teams of a wide range of companies across the Asia-Pacific region, half of which are multinationals with more than five offices worldwide.
Regulatory compliance and disclosure was the most significant challenge facing governance teams from both regional head offices and subsidiary offices, reflecting the gravity of the potential consequences – including financial, legal or reputational damages – in the occasion of a regulatory breach.
Unlike head offices, subsidiary offices also found data management and documentation challenging. As more companies expand across the region and set up subsidiaries in different countries, data management becomes all the more crucial for monitoring and management.
However, despite the challenges posed by compliance and data management, less than 40 percent of respondents currently use a technological platform to assist their management functions. Over half of the respondents continue to print and courier board books to board members, creating a high risk of losing secure information along the way.
Despite frequent threats of data hacks and information leaks, a large majority (82 percent) of respondents still use private, non-secured emails to communicate, and 62 percent of board communications are not encrypted, representing an alarming lack of investment into the security of companies’ most confidential information.
Although the Reuters study does not break down the results by country, progress reports by the Asian Development Board and individual country governance committees reflect the varying degrees of progress in terms of corporate governance policy across Asia-Pacific.
In Singapore, the recently released 2014 Governance and Transparency Index by the National University of Singapore’s Business School reveals significant improvements in reinforcing good corporate governance, risk management and transparency. The first comprehensive review of companies since the country’s corporate governance code was updated in November 2012, the study reinforces the positive impacts of the code change for companies.
As part of the roadmap towards ASEAN’s capital market integration, the ASEAN Capital Markets Forum (ACMF) introduced a scorecard for corporate governance to identify strengths and areas for improvement in each of the participating Southeast Asian countries. Across Asia, the common challenges facing the region include awareness of corporate governance principles, strength of legal frameworks and enforcement.
The need for effective corporate governance in the Asia-Pacific region is more pertinent than ever, as ASEAN inches ever closer to regional integration in 2015, a change that will challenge companies to maximize the market potential of the 10 nation economic bloc.
According to the internationally accepted Organization for Economic Cooperation and Development (OECD) Principles of Corporate Governance, effective governance is essential to improving economic efficiency and growth, as well as boosting investor confidence.
“Good corporate governance should provide proper incentives for the board and management to pursue objectives that are in the interests of the company and its shareholders and should facilitate effective monitoring,” according to the OECD. “The presence of an effective corporate governance system, within an individual company and across an economy as a whole, helps to provide a degree of confidence that is necessary for the proper functioning of a market economy.”
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