By Helen Langton
Globalization has opened up doors for borderless business transactions. Increasingly, the implementation of new policies in certain jurisdictions impacts other territories. This interconnectivity involves understanding the effects of the geo-political landscape and the accompanying sanctions brought about by evolving global regulations and legislation across multiple nations.
In Asia, rising tensions between the US and China have triggered the creation of China’s Anti-Foreign Sanctions Law. This move primarily aims to protect Chinese interests on a global scale. The foreign policy measures and countermeasures of these two economic superpowers create new legislation affecting the conduct of businesses in the Asia-Pacific region – which then entails those firms mitigating the effects of sanction controls.
Responsibility for these measures rests on the shoulders of executive-level managers of both local and international companies. They need to keep abreast of reports in mainstream news media on worldwide events that can have an impact on their businesses. The ever-changing and complex issues that arise will require them to assess the effects of sanction controls and take decisions that could impact their supply chains.
Adding to the scale of the challenge faced by C-suite executives are the divergent policies and regulations of nations within particular jurisdiction controls, with these often encompassing diverse business cultures and economies.
Understanding the Supply Chain
In order to remain compliant with the latest sanctions, business leaders, must carefully scrutinize all aspects of their supply chain. This includes a thorough screening of third-party providers that could present the risk of labor practices that run counter to stipulated regulations.
This may be easier said than done especially when transactions are indirectly conducted through major trading hubs in Hongkong and Singapore.
Careful assessment and ongoing awareness of the business climate, while proactively checking minute changes, will create a positive impact on their company’s future profitability. Such measures will help better shield the business in this evolving regulatory landscape.
There will also be cases where current circumstances do not warrant sanction controls in certain jurisdictions. But top-level executives must have the foresight to identify potential threats and lay the foundations in advance for suitable mitigation measures. This will ensure proper compliance and continuity in their supply chain.
The problem with sanctions and their accompanying regulations is that there are areas that can be affected by changes in the geo-political landscape. A shift, for instance, in policies governing blocking assets and trade restrictions by the US will influence trade and commerce in the region. A Singaporean firm may face current sanctions in dealing with countries such as Myanmar and North Korea but may find these regulations lifted in the future.
Risk mitigation
Stricter measures are being put in place by regulators. Corporate fines which used to be taken into consideration are no longer deemed sufficient.
The responsibility now rests on the shoulders of senior-level directors. They will be accountable and held liable for any malpractice committed by their staff even if this leads to possible prosecution. This is such a daunting task, making it imperative that they implement risk mitigation strategies befitting the needs of their company.
Anticipating changes and creating a viable risk mitigation strategy can help protect the company from sanctions risk in the future. It is, therefore, important to have horizon scanning executive-level managers who continuously monitor current events. This will ensure company readiness should problems arise. Proper documentation and discussion should be included in the agenda of company meetings to protect the supply chain.
Placing individuals that are both knowledgeable and experienced in dealing with the entirety of the supply chain in key positions is vital. Companies should also invest in the latest advancement in tools and other artificial intelligence systems that will complement the expertise of key personnel. This will ensure early detection and intervention of sanctions risk violations.
The International Compliance Association (ICA) provide company training and education on the ongoing changes in the compliance landscape. ICA offers sanctions courses that are constantly updated to keep up with the changing policies.
Regulators are aware that even with the best training, strategies, software, and people in your organization, mistakes will still happen. What is important is for companies to have systems in place to ensure compliance. In the event that problems do arise, prompt self-disclosure to regulators is expected including creating viable solutions to make sure that the problem will be properly addressed.
If set up properly, top-level management, their entire team, and the company in general will be properly protected amidst ever-evolving global supply chain regulations.
Helen Langton is the CEO, Middle East and APAC, International Compliance Association