Global Uncertainty and Regulatory Change are Top Challenges in ASEAN
Global uncertainty, regulatory change, and operational risk pose the greatest challenges for companies in ASEAN, according to a new KPMG survey of over 1,500 Audit Committee (AC) members in 36 countries. Among the AC members surveyed, 106 were from ASEAN1.

The same survey also found that 40 percent of AC members in ASEAN think it is "increasingly difficult" to oversee the major risks on the AC’s agenda in addition to its core oversight responsibilities. These responsibilities have expanded beyond the traditional remit of financial reporting to include oversight of the risk management process and other areas of risk such as compliance, anti-bribery and corruption, and operational risks. As a result, the time required for ACs to carry out their responsibilities has increased – particularly in Singapore, where over half of ACs now spend significantly more time fulfilling their responsibilities. More than 60 percent of ACs in Indonesia and just over 40 percent of ACs in Thailand and Philippines have seen a moderate increase in the time required to carry out their responsibilities.

As the sources of risks intensify and diversify, audit committee members in ASEAN recognise the need for more agenda time to deliberate on them. The top three issues they cite as requiring "significantly more" attention in 2015 include adequacy and effectiveness of controls around both financial reporting and operational risks, and oversight of the risk process.

To improve ACs’ overall effectiveness over the longer term, some of the following concerns will have to be addressed:
  • The quality of risk information is falling short in particular on cyber risk and technology change, talent management, growth and innovation and possible disruption to the business model. Exposure to critical infrastructure failures may also require more attention.
  • Many ACs want to dive deeper into the finance organization’s work, especially financial risk management, treasury and capital allocation, M&A, and tax.
  • There is need for a deeper understanding of the company’s strategy and risks, greater diversity of thinking, more dialogue and IT expertise to improve AC effectiveness
  • The internal audit function could deliver greater value to the organization
  • External auditors could better support ACs by sharing views on the quality of the company’s financial management team, providing industry-specific insights, and by helping the AC stay apprised of accounting and auditing developments.
1 The four ASEAN countries included in the survey were Singapore (32 AC members), Indonesia (30), Thailand (23) and the Philippines (21).
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