ASIC chair urges directors to take the lead on compliance
The corporate regulator has said directors of companies must do more to establish a culture of compliance with professionals facing a growing list of demands and expectations.
The role of compliance professionals is becoming critical following recent regulatory changes such as the mandatory climate-related reporting regime and rapid technological advances, according to ASIC chair Joe Longo.
Speaking at the Australian Compliance Institute Annual Conference, Longo said as the demands and expectations on compliance professionals continue to grow exponentially, company directors must establish and lead a culture of compliance in their organisation.
"This includes monitoring the arrangements the company has in place to ensure compliance with regulatory obligations," Longo said.
A recent global study of chief compliance officers by KPMG found that 84 per cent expect to face increasing regulatory expectations and scrutiny in the next two years.
Just over one-third said regulatory requirements are currently their biggest compliance challenge, followed by data analytics at around 30 per cent. Around a third view cyber security as their top compliance improvement priority.
The study also found that four in 10 ESG compliance programs are still in the planning and development stage.
Longo said that ASIC is aware of the impact of law reform and new regulatory requirements on businesses and markets.
"This is why, as industry adjusts to new requirements, our approach has generally been to take a pragmatic and proportionate approach to supervision and enforcement during the transition phase of any implementation," he said.
Longo said directors can play a role in ensuring the company has a fit-for-purpose compliance function by monitoring the arrangements the company has in place to ensure compliance with regulatory obligations.
"[However] it's the compliance professionals who are closer to the nuts and bolts of how the business runs. They do the work to support and implement those arrangements," he said.
"They’re the ones who can first spot the risks, and propose how to manage them – in a way that is commercial, legal, ethical, cost-effective and forward-looking – in consultation with the board and others. They’re the ones who work with management to implement the systems and controls, and see that they’re followed."
With the mandatory climate reporting regime legislation now passed by Parliament, Longo said compliance teams will play a vital role in ensuring that their organisations are able and ready to meet these new reporting obligations.
"As I have previously observed, the introduction of a compulsory climate risk disclosure regime is the biggest change in Australia in financial reporting and disclosure standards in a generation," he said.
"We know these reporting standards are new and that some disclosures are novel – perhaps more forward-looking than those required to be disclosed under other periodic financial reporting obligations."
ASIC is also aware that there will be a period of transition as industry continues to build capability and implement the organisational changes that will be required to comply with the regime.
"Entities may wish to consider utilising existing processes and procedures that have likely been refined over many years to prepare and verify financial reporting disclosures," Longo said.
"Consider the extent to which sustainability reporting disclosures can be integrated into existing risk and compliance measures. This applies to all entities that will eventually be captured by this regime – start engaging with these new obligations early, so you can be prepared when the time does come for you to lodge your first report."
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