Loopholes in Hong Kong Expense Management Practices that Put Corporate Governance at Risk

Survey unveils expense vulnerabilities companies should be aware of

Hong Kong – 7 December 2017. Expense management processes in many Hong Kong businesses are vulnerable to fraud, non-compliance, human errors and inefficiencies, according to a survey of finance executives and employees in Hong Kong. The survey was sponsored by Concur, an SAP company and the world's leading provider of travel, expense and invoice management solutions. The survey also found that few finance executives have a strategy in place to digitally transform their expense operations. And the survey discovered that while mobile workforce is on the rise, some companies are unable to fully support business operations on the road with end to end solutions. The results suggest that Hong Kong companies are potentially impairing their corporate governance, competitiveness and employee satisfaction due to such inadequacies.

Expense management undermining companies’ corporate governance and productivity

The survey found that many current expense practices adopted by Hong Kong companies are susceptible to exploitation. Over one third of finance executives said they do not have an automated solution in place to detect red flags on potential fraud, and furthermore claimed it is difficult for them to ensure policy compliance. Over one third of regular employees admitted claiming expenses for non-expendable items, again suggesting potential fraud and a lack of compliance.

Furthermore, 47 per cent of finance executives are worried that their expense procedures are vulnerable to human errors and inaccuracies. Lastly, inefficiencies are also a problem, with over one third of regular employees feeling expense procedures involve too much paperwork and are too slow and cumbersome.

According to Mr. Boonthai Hoh, Managing Director, Greater China, Concur, “If not addressed properly, fraud and non-compliance can undermine corporate governance, while human errors and inefficiencies can adversely impact productivity”.

Hong Kong lagging behind in the digital transformation of expense management

In her first policy address as the Chief Executive of the SAR, Carrie Lam emphasized the need to step up Hong Kong’s leadership in the digital space, reflecting a concern on people’s minds that “Asia’s world city” is losing its competitive edge and falling behind its neighbors.

Such digital transformation can only take place if the entire business, including finance, is on board with the strategy. However, Concur’s survey reported that less than 15 per cent of Hong Kong finance executives are reasonably familiar with the term “digital transformation,” and only 18 per cent have a digital transformation strategy for finance in place. The lack of digital transformation for finance arguably explains the problems highlighted earlier, since legacy expense processes are more susceptible to fraud, non-compliance or human error than digital platforms.

Mr. Hoh added, “The survey results suggest while many companies claim to be digitally transforming, finance leaders are being left out of the digital transformation conversation, as evidenced by their lack of plans to digitally transform the finance function. Failure to embrace digital transformation at all levels within the organization limits Hong Kong companies in vital ways such as cost-control, auditing and global competitiveness.”

Mobile workforce in Hong Kong is on the rise, but not all companies are adequately supporting this trend  

In 2018, Hong Kong’s smartphone penetration rate is forecasted to reach 87.2 per cent [1]. With the proliferation of mobile technology, professionals can now work from home, on the road, or elsewhere. Concur’s survey reports that 80 per cent of regular employees are increasingly dependent on mobile devices for work.

Given this, it’s vital that businesses keep up with these changes and find ways to ensure their systems can support the way employees work. However, the survey found that while over two-thirds of finance executives claim that their staff can file expenses on mobile; almost half of the managers say there is no facility for approving expenses on mobile. In other words, end-to-end mobile solutions for expense claims are not being implemented in some corporations, which may lead to workforce dissatisfaction and loss of productivity.   

Intelligent automation provides a solution for expense management problems

Automated and intelligent expense platforms are one way to resolve the problems discovered in the survey. As Mr Hoh claims “The best way to mitigate these issues starts with intelligent automation that can detect human error, identify fraud as soon as it happens, highlight non-compliance and support the mobile workforce”. In addition to resolving the cited issues, intelligent automation can provide further benefits, such as big data analytics that can lead to better budgeting and financial decision making. For example, analyzing expense data can provide insights into which vendors are being used the most by employees. This data can subsequently be leveraged to secure better deals from those vendors, thereby reducing operating costs. Finance leaders must hence learn much more about digital transformation and develop clear strategies for digitizing their financial operations in order to improve their competitiveness.

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About the Survey The survey was conducted by Concur in partnership with Morar HPI in September 2017 and examined how expenses are processed in businesses with over 250 employees in Hong Kong. 107 Finance executives and 316 regular employees (who file 4+ expense claims a year) from such businesses were interviewed. Respondents could answer the survey in either English or Chinese.

About Concur For more than two decades, Concur, an SAP company, has taken companies of all sizes and stages beyond automation to a completely connected spend management solution encompassing travel, expense, invoice, compliance and risk. Concur’s global expertise and industry-leading innovation keep its customers a step ahead with time-saving tools, leading-edge technology and connected data, in a dynamic ecosystem of diverse partners and applications. User-friendly and business-ready, Concur unlocks powerful insights that help businesses reduce complexity and see spending clearly, so they can manage it proactively. Learn more at concur.com.hk .

[1] https://www.emarketer.com/Article/Asia-Pacific-Boasts-More-Than-1-Billion-Smartphone-Users/1012984