2014 Regulatory Changes Impact SMEs

Accounting Today lists nine key regulatory changes identified by Paychex that could have a significant impact on Small Mid-Sized Enterprises (SME). 

 Many SME’s hope to fly under the radar when it comes to regulatory compliance issues. With the drive toward greater transparency and governance practices required by regulators and corporate stakeholders, SMEs must adopt better engagement strategies to incorporate regulatory mandates into the enterprise. 

Regulatory compliance initiatives need not be a check the box exercise. SME’s dedicated to a best practices regimen incorporate regulatory compliance initiatives as an opportunity to implement improvements in operational and governance practices. SME’s committed to a culture of continuous improvement use regulatory mandates to integrate requirements into sound practices as central pillars of effective governance, risk, compliance (GRC) program.

Sound practices are a set of standards and controls that mitigate numerous risk factors in the corporate enterprise. Sound practices address corporate governance, operational and market risk factors, regulatory compliance, corporate citizenship, and stakeholder communications within a set of defined expense ratios. Market leading SME’s effectively ascertain emerging regulatory initiatives to optimize operations to enhance competitive position. 

The Paychex list notes the Affordable Healthcare Act, Defence of Marriage Act, Minimum Wage legislation, Immigration and E-Verify, IRS focus on Revenue Recognition, Retirement Programs, Employment Regulations, Privacy Rights and Data Security, Mobile Technology and Bank regulations. These emerging regulatory concerns need to be thoroughly assessed to determine how they can be incorporated into the company’s business model to create a new and improved value proposition for clients, employees and stakeholders.

A STEEPLE analysis is a useful tool to determine how these emerging issues will impact the SME business model. STEEPLE is an acronym for Social, Technological, Economic, Environmental, Political, Legal and Emerging Risk factors confronting the business. A STEEPLE analysis is fully incorporated into Sum2’s S3 app.

Sound practices require that regulatory compliance programs be embraced as a brand building exercise. Corporations that approach compliance by implementing best practice solutions will mitigate reputational and regulatory risk, attract high end clientele, and command premium product margins.

Sum2 believe this to be the case as well. Our clients engage risk as a daily cost of doing business. We design risk management products for small business managers that empower them to lower the odds and consequences of damaging risk events while positioning themselves to be the beneficiaries of opportunities changing market conditions produce. 

Get risk aware and protect your business with the S3 an SME Seismograph, a risk detector and an early warning and opportunity discovery app on Google Play. 

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Risk: regulatory, tax, emerging risk, GRC, S3, STEEPLE, AHCA, Defence of Marriage Act, Card Check, Immigration and E-Verify, Minimum Wage, Accounting Today, IRS, Paychex, STEEPLE

IPCC: No One Is Immune From Effects of Climate Change

The Intergovernmental Panel on Climate Change (IPCC) has issued the 32-volume, 2,610-page report on the changing global climate. The report sounds a clear alarm that global climate change is accelerating and its consequences are having immediate impact on the world’s ecosystems. 

Scientists warn that steps must be taken to mitigate the social impact of climate change and prepare communities to adapt to shifting environmental conditions. 

This is the fifth report issued by the IPCC. The first report was published in 1990 with subsequent updates issued every 5 years. The report, prepared by teams of independent scientists noted two immediate consequences of global warming. Michael Oppenheimer, a lead scientist on the commission noted; “the first consequence is rising mortality rates due to heat waves. Last year over 35,000 people died as a result of prolonged heat waves. Another current impact of climate change is declining crop yields. The study reports that occurrences of declining crop yields dramatically rose while occurrences of increase yields steeply declined”.

Earlier reports of the IPCC advocated for the need to slow the rate of growth of carbon emissions with Cap and Trade market mechanisms. Failing to do so, the world would begin to experience the adverse effects of climate change by the close of this century. Subsequent reports indicated that evidence of climate change was growing and shortened the time frames when the impact of global warming would occur. The report released today indicates that the effects of global climate change are presently occurring and immediate action is required to mitigate the risks and adapt to the inevitable changes in the global environment.

Examples of the effects of climate change cited in the report are numerous. Persistent drought conditions in the Western United States, Australia and Sub Saharan regions and its effect on crop failures, agricultural yields, massive wildfires and water shortages. Accelerated glacial melt in the Himalayas, North America, the Polar Regions and Greenland and its impact on ocean currents, sea rise levels and massive mega storms that are growing in intensity and frequency. The thawing of permafrost soils near the Arctic Circle is releasing massive amounts of methane gas accelerating the greenhouse effect. Deforestation and clear cutting of old growth forests, and the burning of the Amazon and Indonesian flora biomass produce massive carbon emissions into the atmosphere. Paris, Beijing, Mexico City, Dallas Fort Worth and Singapore routinely experience poor air quality conditions due to excessive burning of fossil fuels. 

As the evidence of global climate change proliferates the divisive politics it engenders grows. Climate change deniers seem to represent industry segments tied to the use of fossil fuels. To solve the complex problem of global climate change the diverse interests of competing stakeholders must be moderated by leaders endowed with the political will to address this multifaceted social problem. 

Risk managers representing private industry, government agencies, community planners, disaster response and NGOs must fully engage the threats and opportunities presented by global climate change. Understanding the increasing velocity of this threat, its growing complexity and interconnectedness to other problems, its growing pervasiveness across regions and ecological topographies and how geophysical conditions aggregate multifaceted factors that compound the problem; make mitigation initiatives and adaptive strategies difficult to implement. Risk managers must transcend narrow parochial interests to engineer innovative solutions to these multidimensional social problems. 

Sum2 understands that humans cannot escape the geophysical conditions of our earth bound home. People and communities cannot escape the realities of geophysics. Citizens are called to engage the challenge of global climate change with courage, thought leadership and inspired innovation. 

Get risk aware with Macroeconomic Risk and Event App (MERA) on Google Play; a Mobile Office app that runs on MS Office and Android. MERA helps SME's assess emerging risk factors to mitigate and adapt to the challenges posed by global climate change.

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risk: IPCC, Report on Global Climate Change, agriculture, aquaculture, political stability, water rights, mega storms, greenhouse gases, wildfires, air pollution, smog, deforestation, regulatory, report, climate change

Singapore Sling: Basel III Amps SME Credit Risk

SME lending just got more expensive in Singapore. Basel III capital requirements has increased the risk weighting on SME loans. Banks are now required to set aside more capital to protect against SME loan defaults. This will drive up the cost of capital for SME’s as lenders pass on added costs to borrowers to maintain healthy margins on SME loans; Singapore’s Business Times reports.

SME’s are a critical driver of economic growth in Singapore. Bank loans to the segment grew more than 10% in 2013. At DBS Bank, SME lending produced a $1.8 billion increase in revenue. 

The Government of Singapore has long been friendly to SME's and remains committed to support the segment as a keystone to the economic recovery of this vibrant Asian Tiger. The government has maintained a risk sharing program to guarantee 50% of an SME loan. Due to the increase in the loan loss reserves mandated by Basel III; the government will now increase its risk share to 70%. It is hoped that this will protect the the flow of capital to SME's.  

This regulatory initiative is another example of the compounding macroeconomic risk factors confronting SME’s. Shifts in credit market conditions and healthy functioning credit channels are major risk factors for SME’s. Acute macro risk, forces market players to compete for capital during restrictive business cycles. SME’s must assess macroeconomic risk factors surrounding the capital funding landscape to maintain profitability.

Get risk aware with Macroeconomic Risk and Event App (MERA) on Google Play; a Mobile Office app that runs on MS Office and Android. MERA helps SME's  assess emerging risk factors to profit from the opportunities shifting markets present.

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risk: sme lending, regulatory, credit risk, Basel III, Singapore, DBS Bank, OCBC, UOB, macroeconomic risk, Strait Times, Singapore Business Times, government spending