Briefly: ‘Sun Life opposes global regs’ and more news

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Opposition to the proposed global financial regulations is growing.

At a meeting of shareholders in Toronto, Donald Stewart, president and CEO of Sun Life Financial Inc., has come out against the move.

Stewart believes that if Canada backs the changes, its strength in overcoming the financial crisis will be diminished. He said the current rules are enough and are doing their job.

Stewart defended life insurers saying if the regulations were to pass, the standards would affect the calculation of liabilities.

Thus far, the federal government itself, the Royal Bank, TD Bank and Power Financial have criticized the proposal. Proponents say if they rules were in place they would prevent banking collapses.

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Cdn corporate profitability to reach stability

The resurgent Canadian corporate profitability is expected to cool off in the second half of 2010, according to the Leading Indicator of Industry Profitability, part of the Conference Board’s Industrial Economic Trends service.

The Indicator, designed to predict future movements in corporate profitability, suggests that Canadian corporate profitability will moderate in the second half of the year, following a strong post-recession rebound.

“Corporate profitability growth is now stabilizing following a sharp decline during the recession and a strong recovery coming out of the downturn,” said Michael Burt, Associate Director, Industrial Economic Trends.

It fell by 37% between the second half of 2008 and the first half of 2009. Profits had increased by 28% by the end of 2009, he said.

“Now that profitability is approaching more normal levels for many industries, the indicator suggests that there will be a significant slowdown in the rate of growth, reflecting the transition to a period of weak or no profit growth,” said Burt.

The rapid rise in the corporate prime interest rate and the decline of raw materials prices, when adjusted for seasonality, were the major factors explaining the reversal.

However, improving labour markets and renewed stock market growth will lead to further increases in profitability in the second half of the year. Another positive indication is the breadth of the recovery – of the 49 industries covered by this survey, 37 recorded an increase in their index last month.

These 49 sectors cover most of the private business activity that takes place in Canada.

External factors such as the fiscal problems in the eurozone or the state of the U.S. housing market are embedded into the analysis.

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Frauds fester locally as companies grow globally

Fear of unethical practices grows as more Canadian companies join the global marketplace, according to a survey by Ernst & Young.

The result of the survey says globalization can mean more exposure to risks such as fraud, bribery and corrupt business practices as some businesses fight to survive recessionary challenges.

“It’s important to remember that these growth opportunities have different risks,” says Mike Savage, leader of Ernst & Young’s Fraud Investigation and Dispute Services practice group. “Local knowledge and due diligence are needed to manage the fraud risks of conducting business in new geographies.”

Nearly 10% of Canadian companies surveyed have experienced “significant” fraud in the past two years. Although this places Canada much lower than the global average, the survey shows fraud risk remains high as some Canadian businesses may cross the line to survive recessionary challenges.

Of those surveyed, 80% of respondents believe in the effectiveness of internal controls to detect fraud, bribery or corruption. While most companies do assess their fraud risk, 6% of Canadians (15% globally) have never assessed their fraud risk, survey revealed.

There, however, remains room for improvement, says Savage. “Canadian companies have made a lot of cuts to survive over the past few years but, as business picks up, there is a risk that the internal controls may be insufficient to support the needs of the new business environment.”

Canadian respondents said the most effective fraud prevention could be achieved by strong internal controls (84% compared to 74% globally), rigorous internal audit (69% versus 65% globally) and regular management reviews (65% compared to 55% globally).

Canadian companies are far more likely to have developed a set of first responses when fraud does occur or a suspected case is reported, says the survey. They include a clear process of reporting incidents to the board (82% compared to 52% globally), defined roles within investigations for internal audit, compliance, risk and legal (76% compared with 51% globally), and consistent disciplinary processes (61% versus 46% globally).

(05/19/10)