Saturday, January 16, 2010
GST
What you should know about GST
Because the new tax is complex and broad-based, we have a lot to learn ahead of its introduction. As a start, StarBizWeek has asked some experts to each highlight five key points.
Pauline Lum
Director, BDO Tax Services Sdn Bhd
•GST is a consumption tax on imported goods, and on supplies of goods and services in Malaysia other than those exempted or zero-rated. It is mainly borne by the end-user/consumer, and therefore, is not intended to add cost to businesses.
•GST is applied at each level of the value chain. This tax will be applicable whenever value is added to goods or a service.
•Businesses are required to register for GST if their annual turnover exceeds RM500,000. They can claim the input taxes paid on purchases of intermediate goods or services, against the GST charged on the final goods or services that they sell.
•Preparations can include the setting up of a GST committee, staff training for all departments, and manuals/systems to ensure compliance. Businesses that do not have internal expertise should consider engaging external advisors.
l As co-head of the tax authority of France, Maurice Laure created the GST system in 1954, when he introduced the TVA (the French abbreviation for value added tax).
Dr Veerinderjeet Singh
President, Chartered Tax Institute of Malaysia
•GST is not a new tax for Malaysia. It is intended to replace the existing sales tax and service tax.
•It has built-in control mechanisms that help minimise tax evasion by traders.
•GST requires good and proper record-keeping by businesses that need to be registered. This can lead to improvements in the maintenance of proper accounts and financial records.
•The tax will not lead to inflationary pressures, that is, a persistent increase in prices.
•Once GST is effectively implemented for some time, there is the possibility of decreases in corporate and personal tax rates.
Ronnie Lim
Country tax leader, Deloitte Malaysia
•Exemption is bad for GST. Businesses should not ask for their output to be exempted as this will create more costs for them, arising from restricted input tax credit. Instead – and perhaps strangely – one should seek to be a taxable person with either zero-rated or standard-rated output.
•GST implementation is not as easy as merely activating an accounting software’s GST module. That system has to be tailored to the profile of the business and the Malaysian GST law.
•Most companies leave tax implications to the tax, accounting or finance departments. GST should be viewed differently as it has enterprise-wide effects.
The sales department has to revise selling prices exclusive of GST. The procurement unit must re-negotiate purchase prices. The legal team need to review long-term contracts. Therefore, the whole company must understand this tax.
•Much more administrative and documentation requirements arise from the introduction of GST. Compliance costs are bound to increase. Often, adverse situations arise when documentation is inadequate.
•GST can potentially reduce tax leakages, such as smuggling, as there could be checks before unusual credit claims are processed. Leakages will be further minimised if the Customs and the Inland Revenue Board are unified to create a powerhouse, as seen in Britain.
Dr Arjunan Subramaniam
Adjunct professor, Universiti Utara Malaysia
•GST is due when a person makes a taxable supply in the course of business. As a taxable person, you must charge GST to your customer when you supply to the customer. This supply is output and your charge to the customer is output tax.
•GST charged to you for your business purchases is called input tax.
•You must pay to the Customs the amount of your output tax minus your input tax. If the input tax is greater than the output tax, the difference is claimed from the department. So keep accurate records of all your sales and purchases.
•GST is a consumption tax. It is your customer who bears the burden of tax.
•Imports are subject to GST, while exports are exempt.
Khoo Chuan Keat
Tax leader and senior executive director, PricewaterhouseCoopers Taxation Services Sdn Bhd
•GST is a fiscal policy feature in over 140 countries. Many developing and emerging economies have been transforming their tax revenue bases by progressively moving from direct taxation to consumption taxes such as GST in recent years. Malaysia is in the minority segment.
•GST affects all functional areas of a business and is not just a finance issue. The GST implementation is not only about reconfiguring the computer system in order to charge output tax. In fact, businesses should re-assess their entire business processes, including supply chains, so as to optimise input tax recoveries. Otherwise, they may suffer input tax leakages, thus hurting their competitiveness and profitability.
•Consumers can expect to see a drop in prices of certain goods and services. Without realising it, the consumers are already paying sales tax and service tax embedded in the supply chain. Anti-profiteering measures should be implemented and strictly enforced to deter traders from taking advantage of GST to raise prices and increase profits.
•The GST input tax incurred by businesses is claimable as a credit if they make taxable supplies. This avoids the cascading tax effect of the current single-stage sales tax and service tax regime, which results in higher prices.
•Recognising the wide-ranging impact of GST, the Government has proposed an initial low rate of 4%, coupled with zero-rating and exemption of essential goods and services. Anti-profiteering legislation and other measures for qualifying persons in the lower-income groups may be introduced to alleviate the adverse impact of GST on consumers.
Dr Jeyapalan Kasipillai
Professor, Monash University Sunway campus
•GST is a multi-stage tax but is a cost only to the final consumer.
•The GST system is transparent, with a built-in mechanism to track down defaulters.
•The new tax will give the Government an opportunity to reduce corporate and individual tax rates.
•It will also enable the Government to subsidise essential controlled items for the poor and to improve healthcare for taxpayers.
•GST can be a good source of government revenue and will help shrink the deficit.
Nicholas Crist
Executive director, KPMG Tax Services Sdn Bhd
•GST and value added tax (VAT) are the same conceptually. Over 100 countries have GST/VAT as part of their tax systems.
•Malaysia’s proposed GST rate of 4% is among the lowest rates in the world. The highest rate currently is 25%.
•Basic necessities, such as food, are proposed to be zero-rated (0%). However, processed food, such as canned food, will be charged at the standard rate. Classification can lead to interpretational issues. For example, in Britain, the courts had to determine whether a Jaffa Cake, a biscuit-like cake, was a biscuit (standard-rated) or a cake (zero-rated).
•GST/VAT can be used as a tool to manage the economy. For example, Britain reduced its VAT standard rate from 17.5% to 15% in December 2008 to boost consumer demand during the financial crisis.
•The Government has indicated that the GST would provide an opportunity to reduce income tax rates. This has happened in other countries, such as Singapore.
Chas Roy-Chowdhury
Head of tax, Association of Chartered Certified Accountants
•In Europe, GST is known as VAT. Most of the rest of the world uses the term GST.
•GST rates may start off low, but in the global context, they have always risen. In the European Union (EU), the rates have increased considerably from the introduction of the tax. The rate in Britain, for instance, was once 10%. It is 17.5% today.
•When Britain introduced VAT in 1973 as a prerequisite to joining the EU, it was seen as a simple tax. Now, it is one of the most complex of taxes. Therefore, serious effort is needed to stop complexity from creeping into the system.
•Because most intra-EU goods are not subject to VAT, there is an opportunity for various types of tax fraud. It is thought that the amount involved could be as high as 100 billion euros.
•There is a debate in the United States over whether to introduce VAT, mainly as a way to address the country’s huge budget deficit.
Bhupinder Singh
Partner, Ernst & Young Tax Consultants Sdn Bhd
•GST will not burden the rakyat. For those currently consuming goods and services that are subject to sales/service tax, the impact of GST should be neutral if the rate is 4%. In fact, consumers should benefit if the suppliers pass on the savings from their ability to claim back input tax on their purchases.
Consumers should also be better off because some essential goods will be zero-rated, while certain items are exempted from GST.
•A business can claim an input tax credit on purchases irrespective of whether it has paid the suppliers, as long as the suppliers have issued tax invoices to the business.
There should be no adverse GST impact on a business that makes taxable supplies. In the long run, the cost of doing business will go down because the business will have the ability to claim input tax on the purchase of goods and services, which they cannot do under the sales/service tax regime.
•Businesses will experience a cash flow impact. They have to charge GST on sales and if the customers are late in paying, the businesses will have to pay the tax first.
•It is important to educate businesses, especially the small players, on the cost savings and potential cash flow savings aspects of GST. It is equally important to educate consumers so that they understand that the goods and services they buy may not necessarily be subject to a price increase because of GST.
•GST works on the affordability concept. As a consumer, you decide which goods and services to buy, and if these are subject to GST, you then have to pay it. This is no different under the current sales/service tax regime except that these taxes are embedded in the price of the goods and services, and the consumer may not realise that they, in fact, bear the taxes.
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Tuesday, February 9, 2010
Wednesday, February 3, 2010
Be wary of hype on global recovery thestar
Monday February 1, 2010
Be wary of hype on global recovery
Global Trends by MARTIN KHOR
Three eminent economic experts last week warned developing countries to be cautious of the current talk of a global recovery and instead, to prepare policy options to face crises.
DEVELOPING countries should be cautious about the current hype about a global economic recovery and instead, prepare policy options in a world where they have to rely less on exports for future growth.
This sombre assessment came from three eminent economic experts who warned that the world economy is not out of the woods yet.
More than a hundred developing countries have not begun to share in the recovery proclaimed by the media.
Dr Yilmaz Akyuz, special economic adviser of the South Centre, Dr Supachai Panitchpakdi, Secre-tary-General of the UN Conference on Trade and Development (Unctad) and Prof Deepak Nayyar, former vice-chancellor of Dehli University, were speaking at a workshop organised by the South Centre last Thursday.
Held at the United Nations building in Geneva, the workshop brought together over a hundred diplomats and researchers from developing countries and international organisations.
The event was chaired by the former president of Tanzania, Benjamin Mkapa, who now chairs the South Centre.
Dr Yilmaz, who is also a former chief economist at the Unctad, said there is consensus that recovery has started, with positive growth expected in all major economies this year. But there are problems ahead.
The crisis intervention policies in developed countries, based on increased government spending and monetary expansion, are creating another bubble, with financial institutions out of touch with the real economy again.
As policy makers recognise the risks of the new bubble, there are signs of an “early exit” from the stimulus plans, such as the end of interest rate cuts and the phasing out of additional spending.
As the effects of the stimulus packages fade away, economic activity may either lose momentum or even turn down, warned Dr Yilmaz. And if the stimulus policy is reversed too soon, there could be a new and deep economic dip.
With the United States running trade deficits, it now needs to adjust, with a shift away from relying on consumer spending to export-led growth.
The US President’s target of doubling exports in five years (in his State of the Union address last week) is in line with this.
The consequences of the US adjustment can have adverse effects on developing countries, predicted Dr Yilmaz. Interest rates are likely to go up, thus increasing the cost of financing and the burden of debt repayment, while a possibly strong dollar would weaken commodity prices.
Can China replace the US as the locomotive for world growth? Dr Yilmaz said there is expectation that China would increase its domestic consumption as its exports will face sluggish markets.
Developing countries that are export-dependent may thus hope that their exports to China will be maintained at least, and thus offset their loss of exports to the US.
However, according to Dr Yilmaz, much of the imports entering China have been inputs used to produce Chinese exports.
Even if China maintains its high growth by switching from exports to local consumption, this will not help developing countries as much, because there is little import content in the goods that the Chinese produce for their local consumption.
“Thus China is not a good substitute for the US or Europe as a market for other developing countries’ exports, even if it were to maintain over 10% growth based on domestic demand,” concluded Dr Yilmaz.
The other two major economies, Germany and Japan, are also not likely to boost their economies and increase their imports. Thus, there will be sluggish and erratic global growth, and instability in capital flows and exchange rates.
Dr Yilmaz also predicted a rise in protectionism and a backlash against globalisation, both in the developed countries. Developing countries will thus have to prepare for testing times ahead.
Dr Supachai warned the developing countries not to be misled by talk about an “early recovery”. In his estimate, more than 100 developing countries are still in recession.
The stimulus plans of developed countries cannot be sustained because they cannot raise more of the huge funds already used.
The Unctad chief added that the recovery is only partial, taking place in some sectors (the stock market and real estate), and there is still to be the unwinding and de-leveraging from household and corporate debt.
After a recession, it takes three to five years for the unwinding, but as this is a great recession, the time needed would be five to seven years, he predicted.
Unctad data showed a 39% drop in foreign direct investment last year, with more than a 50% drop in some developing countries. There is no robust FDI rebound anticipated this year.
Dr Supachai also painted a bleak picture on trade, whose volume fell by 15% last year and is expected to rebound by only 5% this year.
The data show that we are in a delicate period, which he called a “post cardiac arrest” situation.
“We have not been successful in getting the global economy out of recession yet, and we should not fall into a business as usual mode which is being promoted by big bankers and those they try to influence,” he said.
Dr Supachai proposed an expansion of South-South cooperation, with developing countries increasing trade among one another and pooling their financial resources, including new regional monetary funds.
The fluctuations in commodity prices should be addressed, and global economic governance should be reformed.
The financial system should also be changed, so that banks be confined to doing narrow banking business (collecting savings to lend out) and not anything more fanciful.
Prof Deepak agreed with Dr Yilmaz that China could not be expected to take up the slack caused by US adjustment. The economic prospects of developing nations depend on recovery in the developed countries, especially the US, but even so, the recession could still become a depression.
The crisis should induce a rethinking of development, said Prof Deepak. There should be a reform in orthodox macro-economic policy thinking which should not focus only on inflation control, and there should be caution in financial liberalisation.
Developing countries should also re-think their relative reliance on external and internal markets and financial resources. Domestic markets are critical and external markets cannot be substitutes.
It is also time to recognise the pro-active role of a developmental state, including in implementing industrial and technology policy. At the international level, there must be coordination of policies of countries.
Fortunately, developing countries are becoming more important in output, trade and the holding of foreign reserves. They can thus have a greater say, but if they organise themselves better.
The conclusion from the workshop speakers was that developing countries should draw their own lessons from the global crisis, not to be complacent about the “recovery”, and re-think development strategies and policy options, as well as be advocates of international financial reform.
As Dr Supachai said, the chance to reform the financial system after the Asian crisis in 1997-98 was missed and another bigger crisis has now hit the world. We may miss the boat again, unless something is done now.
Be wary of hype on global recovery
Global Trends by MARTIN KHOR
Three eminent economic experts last week warned developing countries to be cautious of the current talk of a global recovery and instead, to prepare policy options to face crises.
DEVELOPING countries should be cautious about the current hype about a global economic recovery and instead, prepare policy options in a world where they have to rely less on exports for future growth.
This sombre assessment came from three eminent economic experts who warned that the world economy is not out of the woods yet.
More than a hundred developing countries have not begun to share in the recovery proclaimed by the media.
Dr Yilmaz Akyuz, special economic adviser of the South Centre, Dr Supachai Panitchpakdi, Secre-tary-General of the UN Conference on Trade and Development (Unctad) and Prof Deepak Nayyar, former vice-chancellor of Dehli University, were speaking at a workshop organised by the South Centre last Thursday.
Held at the United Nations building in Geneva, the workshop brought together over a hundred diplomats and researchers from developing countries and international organisations.
The event was chaired by the former president of Tanzania, Benjamin Mkapa, who now chairs the South Centre.
Dr Yilmaz, who is also a former chief economist at the Unctad, said there is consensus that recovery has started, with positive growth expected in all major economies this year. But there are problems ahead.
The crisis intervention policies in developed countries, based on increased government spending and monetary expansion, are creating another bubble, with financial institutions out of touch with the real economy again.
As policy makers recognise the risks of the new bubble, there are signs of an “early exit” from the stimulus plans, such as the end of interest rate cuts and the phasing out of additional spending.
As the effects of the stimulus packages fade away, economic activity may either lose momentum or even turn down, warned Dr Yilmaz. And if the stimulus policy is reversed too soon, there could be a new and deep economic dip.
With the United States running trade deficits, it now needs to adjust, with a shift away from relying on consumer spending to export-led growth.
The US President’s target of doubling exports in five years (in his State of the Union address last week) is in line with this.
The consequences of the US adjustment can have adverse effects on developing countries, predicted Dr Yilmaz. Interest rates are likely to go up, thus increasing the cost of financing and the burden of debt repayment, while a possibly strong dollar would weaken commodity prices.
Can China replace the US as the locomotive for world growth? Dr Yilmaz said there is expectation that China would increase its domestic consumption as its exports will face sluggish markets.
Developing countries that are export-dependent may thus hope that their exports to China will be maintained at least, and thus offset their loss of exports to the US.
However, according to Dr Yilmaz, much of the imports entering China have been inputs used to produce Chinese exports.
Even if China maintains its high growth by switching from exports to local consumption, this will not help developing countries as much, because there is little import content in the goods that the Chinese produce for their local consumption.
“Thus China is not a good substitute for the US or Europe as a market for other developing countries’ exports, even if it were to maintain over 10% growth based on domestic demand,” concluded Dr Yilmaz.
The other two major economies, Germany and Japan, are also not likely to boost their economies and increase their imports. Thus, there will be sluggish and erratic global growth, and instability in capital flows and exchange rates.
Dr Yilmaz also predicted a rise in protectionism and a backlash against globalisation, both in the developed countries. Developing countries will thus have to prepare for testing times ahead.
Dr Supachai warned the developing countries not to be misled by talk about an “early recovery”. In his estimate, more than 100 developing countries are still in recession.
The stimulus plans of developed countries cannot be sustained because they cannot raise more of the huge funds already used.
The Unctad chief added that the recovery is only partial, taking place in some sectors (the stock market and real estate), and there is still to be the unwinding and de-leveraging from household and corporate debt.
After a recession, it takes three to five years for the unwinding, but as this is a great recession, the time needed would be five to seven years, he predicted.
Unctad data showed a 39% drop in foreign direct investment last year, with more than a 50% drop in some developing countries. There is no robust FDI rebound anticipated this year.
Dr Supachai also painted a bleak picture on trade, whose volume fell by 15% last year and is expected to rebound by only 5% this year.
The data show that we are in a delicate period, which he called a “post cardiac arrest” situation.
“We have not been successful in getting the global economy out of recession yet, and we should not fall into a business as usual mode which is being promoted by big bankers and those they try to influence,” he said.
Dr Supachai proposed an expansion of South-South cooperation, with developing countries increasing trade among one another and pooling their financial resources, including new regional monetary funds.
The fluctuations in commodity prices should be addressed, and global economic governance should be reformed.
The financial system should also be changed, so that banks be confined to doing narrow banking business (collecting savings to lend out) and not anything more fanciful.
Prof Deepak agreed with Dr Yilmaz that China could not be expected to take up the slack caused by US adjustment. The economic prospects of developing nations depend on recovery in the developed countries, especially the US, but even so, the recession could still become a depression.
The crisis should induce a rethinking of development, said Prof Deepak. There should be a reform in orthodox macro-economic policy thinking which should not focus only on inflation control, and there should be caution in financial liberalisation.
Developing countries should also re-think their relative reliance on external and internal markets and financial resources. Domestic markets are critical and external markets cannot be substitutes.
It is also time to recognise the pro-active role of a developmental state, including in implementing industrial and technology policy. At the international level, there must be coordination of policies of countries.
Fortunately, developing countries are becoming more important in output, trade and the holding of foreign reserves. They can thus have a greater say, but if they organise themselves better.
The conclusion from the workshop speakers was that developing countries should draw their own lessons from the global crisis, not to be complacent about the “recovery”, and re-think development strategies and policy options, as well as be advocates of international financial reform.
As Dr Supachai said, the chance to reform the financial system after the Asian crisis in 1997-98 was missed and another bigger crisis has now hit the world. We may miss the boat again, unless something is done now.
Tuesday, February 2, 2010
Information governance
Wednesday February 3, 2010
Information governance key to new performance agenda
Business Matters - By Susanna Lim
IN November 2009, Ernst & Young released its report, Lessons from change, which provides insights from an extensive global research programme into what companies are doing to respond to current challenges and drive performance improvement.
Based on our conversations, a new agenda for success is beginning to emerge. The global economy may be stabilising but that does not mean companies expect a return to the “normal” conditions of the previous decade.
Many respondents expect a tougher future economy, and consequently, a changed business agenda.
In Lessons from change, eight performance goals were identified for companies to prepare for the rebound and to succeed in the new era.
These eight goals are interlinked and make up the “performance wheel”.
In this article, we will focus on two of these goals:
Optimise the flexibility of your operations: Increase business responsiveness through greater flexibility and resource management.
Revitalise the way you manage risk: Understand the business’ risk complexity and depth to align a strong control framework.
Our study showed that nearly 60% of respondents sought greater efficiency through (i) increased alliances and business relationships; (ii) cost reduction programmes; and (iii) use of technology (and service providers).
Correspondingly, we will illustrate the performance goal of establishing a broader governance, risk and control framework.
We will also consider the often neglected areas of information and outsourcing risks which are gaining more prominence in the new performance agenda.
Governance and risk management
Business is fundamentally about taking risk and risk management is about ensuring risks are appropriately measured and controlled.
In our recent study, Future of risk, respondents cited increase in the following risks: financial, strategic, compliance and operational risks.
Earlier research on Fortune 1000 companies indicated that on average, 4% of revenue is spent on risk management.
Getting the right risk balance is a challenge as governance and risk frameworks are not always robust, nor comprehensively executed.
The scope may be too narrow, overly-concerned with regulatory compliance and may exclude information risks and third party risks.
In addition to infrequent assessments, there have been cases where risk management focused on internal operations rather than external operations, which is where most risks arise, including supply chain and outsourced functions such as back-office, information systems or e-commerce.
Management has grown cognisant of this, with over 80% of respondents now incorporating risk management into strategic decision-making.
Reputational risk, information risk, fraud risk and third party risk have also received a higher degree of attention.
Businesses are also paying more attention to information governance, security and outsourcing risks.
We have seen a shift in the sourcing and deployment of technology to support business flow of information.
Information and systems are now accessed by business partners, customers and service providers, leading to a rise in both internal and external threats.
Ernst & Young’s recent 12th Annual Global Information Security Survey identified improving information risk management as the top IT priority.
Out of over 1,900 respondents, 89% plan to spend more or at least the same amount on risk management in the current financial year.
Correspondingly, the effort to comply with greater complexity and the number of regulations has increased. Malaysian companies, as with other countries, need to revisit their data management and security practices to meet the introduction of data protection and privacy regulations.
The survey also identified a growing concern with reprisals from recently separated employees as well as increased external attacks on websites and networks.
A robust information governance or risk framework, including the monitoring of external information and outsourcing risks, is a straightforward yet comprehensive way to assess and mitigate information security, integrity and availability risks.
However, companies may face challenges to obtain adequate skilled resources and budget to manage information risks in the current era.
In order to revitalise information risk management effectively and efficiently, organisations need to consider leading practices, including:
i. an integrated information-centric business risk framework, which:
aligns processes (internal and external) with information flows
has more in depth assessments to identify and manage systems, data, risks and controls
enforces comprehensive IT policies across the organisation, service providers and business partners
ii. enhanced information security responsiveness through:
a risk-based security strategy to help prioritise initiatives
identification of regulations, compliance and validation of controls
leveraging on technology and co-sourced security resources to address gaps, if any
Information governance must be revitalised to support your business and will take on a new importance in the performance agenda to help organisations across the globe thrive in the new market.
Susanna Lim is a partner with Ernst & Young Advisory Services Sdn Bhd
Information governance key to new performance agenda
Business Matters - By Susanna Lim
IN November 2009, Ernst & Young released its report, Lessons from change, which provides insights from an extensive global research programme into what companies are doing to respond to current challenges and drive performance improvement.
Based on our conversations, a new agenda for success is beginning to emerge. The global economy may be stabilising but that does not mean companies expect a return to the “normal” conditions of the previous decade.
Many respondents expect a tougher future economy, and consequently, a changed business agenda.
In Lessons from change, eight performance goals were identified for companies to prepare for the rebound and to succeed in the new era.
These eight goals are interlinked and make up the “performance wheel”.
In this article, we will focus on two of these goals:
Optimise the flexibility of your operations: Increase business responsiveness through greater flexibility and resource management.
Revitalise the way you manage risk: Understand the business’ risk complexity and depth to align a strong control framework.
Our study showed that nearly 60% of respondents sought greater efficiency through (i) increased alliances and business relationships; (ii) cost reduction programmes; and (iii) use of technology (and service providers).
Correspondingly, we will illustrate the performance goal of establishing a broader governance, risk and control framework.
We will also consider the often neglected areas of information and outsourcing risks which are gaining more prominence in the new performance agenda.
Governance and risk management
Business is fundamentally about taking risk and risk management is about ensuring risks are appropriately measured and controlled.
In our recent study, Future of risk, respondents cited increase in the following risks: financial, strategic, compliance and operational risks.
Earlier research on Fortune 1000 companies indicated that on average, 4% of revenue is spent on risk management.
Getting the right risk balance is a challenge as governance and risk frameworks are not always robust, nor comprehensively executed.
The scope may be too narrow, overly-concerned with regulatory compliance and may exclude information risks and third party risks.
In addition to infrequent assessments, there have been cases where risk management focused on internal operations rather than external operations, which is where most risks arise, including supply chain and outsourced functions such as back-office, information systems or e-commerce.
Management has grown cognisant of this, with over 80% of respondents now incorporating risk management into strategic decision-making.
Reputational risk, information risk, fraud risk and third party risk have also received a higher degree of attention.
Businesses are also paying more attention to information governance, security and outsourcing risks.
We have seen a shift in the sourcing and deployment of technology to support business flow of information.
Information and systems are now accessed by business partners, customers and service providers, leading to a rise in both internal and external threats.
Ernst & Young’s recent 12th Annual Global Information Security Survey identified improving information risk management as the top IT priority.
Out of over 1,900 respondents, 89% plan to spend more or at least the same amount on risk management in the current financial year.
Correspondingly, the effort to comply with greater complexity and the number of regulations has increased. Malaysian companies, as with other countries, need to revisit their data management and security practices to meet the introduction of data protection and privacy regulations.
The survey also identified a growing concern with reprisals from recently separated employees as well as increased external attacks on websites and networks.
A robust information governance or risk framework, including the monitoring of external information and outsourcing risks, is a straightforward yet comprehensive way to assess and mitigate information security, integrity and availability risks.
However, companies may face challenges to obtain adequate skilled resources and budget to manage information risks in the current era.
In order to revitalise information risk management effectively and efficiently, organisations need to consider leading practices, including:
i. an integrated information-centric business risk framework, which:
aligns processes (internal and external) with information flows
has more in depth assessments to identify and manage systems, data, risks and controls
enforces comprehensive IT policies across the organisation, service providers and business partners
ii. enhanced information security responsiveness through:
a risk-based security strategy to help prioritise initiatives
identification of regulations, compliance and validation of controls
leveraging on technology and co-sourced security resources to address gaps, if any
Information governance must be revitalised to support your business and will take on a new importance in the performance agenda to help organisations across the globe thrive in the new market.
Susanna Lim is a partner with Ernst & Young Advisory Services Sdn Bhd
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