Asia Pacific’s Corporate Finance Weaknesses Exposed by Global Volatility

A new study reveals that multinational corporations across the Asia Pacific region, including Australia and New Zealand, are facing significant financial vulnerabilities. These weaknesses are being brought to light by the current climate of intense global volatility. Many organisations are simply not prepared for the disruptions stemming from heightened international tensions, shifting trade policies, and new tax legislation.

The research identifies a critical area of concern: fragmented intercompany processes. These internal financial workflows have become a major blind spot, directly threatening a company’s ability to withstand unpredictable economic conditions. While businesses often concentrate on external strategies, such as adapting their supply chains, they tend to overlook the profound impact on their internal financial operations. These intercompany activities, encompassing cross-entity sales, shared service cost allocations, and internal capital transfers, are frequently disjointed, lack proper governance, and are dangerously susceptible to breakdowns.

These operational inefficiencies are creating very real business risks. Unresolved intercompany balances are effectively trapping cash that could otherwise be used productively. Inconsistencies in how transfer pricing is handled are raising red flags with auditors, and significant delays in finalising month-end reports are preventing companies from seeing an accurate picture of their financial health. A primary root cause identified is an “ownership vacuum,” where no single person or department takes clear responsibility for processes that cut across various business units, different software systems, and international borders.

This internal fragility severely limits a corporation’s capacity to react nimbly to major macroeconomic shifts, including new trade restrictions, rampant inflation, and evolving tax regulations. The situation is made more precarious by a global trend toward increased regulatory scrutiny. Governments are implementing stricter transparency mandates and real-time audit capabilities, which penalise financial disorganisation just as harshly as deliberate deception.

Mike Goldsworthy, a Senior Manager of Intercompany Value Architecture based in Sydney, emphasised the urgency, stating that organisations cannot afford to keep their intercompany processes in the dark. He noted that delaying action only increases the eventual cost in terms of time, trapped cash, and compliance risks. The positive aspect, he pointed out, is that this is not a problem stemming from a lack of intention but rather from flawed structures, which can be redesigned and rebuilt.

To tackle these systemic issues, the study proposes a foundational framework built on three essential pillars: ownership, standardisation, and visibility. It recommends that companies meticulously map their transaction lifecycles to assign unambiguous accountability. Furthermore, they should standardise internal data to guarantee accuracy and establish real-time visibility into their processes. This allows potential problems to be identified and addressed before they can escalate into major crises. A comprehensive guide for building these resilient financial foundations is available in the full whitepaper.

(Source: ITWire Australia)