Global volatility exposes intercompany risks in Asia Pacific

A new whitepaper has highlighted how increased global volatility is exposing key vulnerabilities in the finance operations of companies across Australia, New Zealand, and the wider Asia Pacific region.

Research conducted for the paper finds that many multinational organisations across the region are unprepared for the financial disruption being caused by ongoing global tensions, new trade restrictions, and evolving tax regulations. According to the research, the fragmentation of intercompany processes-such as cross-entity sales, shared service allocations, and capital transfers-has become a major blind spot, presenting significant risk at a time when international business conditions remain uncertain and subject to rapid change.

Intercompany blind spots

The whitepaper, entitled "Intercompany Under the Pump: How Global Chaos is Exposing Your Weakest Link," argues that internal operations are increasingly overlooked as companies devote their efforts to outward-facing strategies like supply chain management. The paper notes that these internal intercompany processes are often fragmented and insufficiently governed, making them particularly susceptible to disruption.

The research identifies a number of concrete issues arising from these inefficiencies. Unresolved balances in intercompany transactions can result in trapped cash, while inconsistencies in transfer pricing can raise audit concerns for multinationals. Delays in month-end reporting further complicate the true assessment of a company's financial position. Underpinning these problems, the study points to a pronounced "ownership vacuum"-a lack of clear accountability as intercompany processes traverse multiple business units, technology systems, and international borders.

Risks and regulatory scrutiny

The whitepaper warns that this ongoing internal fragility limits the capacity of organisations to cope with macroeconomic changes, including the impact of inflation, new trade restrictions, and changing tax regulations. The risk is further amplified by tighter regulatory scrutiny. Many jurisdictions are introducing more stringent transparency requirements and developing the capability for real-time audits, which increases the penalties for both organisational disarray and non-compliance.

"Organisations can't afford to let intercompany remain invisible," said Mike Goldsworthy, a Sydney-based Senior Manager of Intercompany Value Architecture, BlackLine.

Goldsworthy highlighted the importance of addressing these problems promptly, stating:

"The longer the delay in addressing these challenges, the more it costs in time, cash, and compliance exposure. The good news is that this isn't a problem of intent. It's a problem of structure, and structural challenges can be rebuilt."

Framework for resilience

The whitepaper proposes a structured response for finance leaders seeking to address these risks. It sets out a three-pillar framework-comprising ownership, standardisation, and visibility-as the foundation for building more resilient intercompany processes. Organisations are advised to map transaction lifecycles in order to assign clear responsibility and accountability, standardise internal data for accuracy, and implement real-time process monitoring to enable early intervention when problems arise.

According to the findings, taking action in these areas may help multinational organisations avoid issues such as reporting delays, cash flow disruptions, and compliance breaches-risks that the paper asserts have become more acute as global volatility persists and regulators raise expectations.

The whitepaper notes that these areas of concern affect virtually all multinational companies operating in Australia, New Zealand, and the broader Asia Pacific. By focusing on clear responsibility, data standardisation, and visibility, finance leaders can establish a foundation likely to withstand the pressures facing organisations amidst unpredictable market and regulatory environments.

The findings provide recommendations aimed at Chief Financial Officers and other finance leaders, encouraging a systematic approach to internal finance structures as an essential part of navigating the current economic landscape and future-proofing against additional global disruptions.