Turkey’s Compliance Risk Management: A Growing Concern for Businesses

As the global economy continues to evolve, corporate risk management and legal compliance have become increasingly important in Turkey. The financial sector plays a significant role in shaping the country’s economic landscape, making it crucial for businesses operating within this space to adhere to stringent regulations.

Standards and Guidelines

The Turkish Commercial Code (TCC) introduced the concept of “early risk detection” as a measure to be taken by an early risk detection committee to foresee and mitigate risks. Privately held companies exceeding certain thresholds may be required to form a committee upon written request from an independent auditor if deemed necessary.

• Listed companies, on the other hand, are subject to stricter guidelines under the Corporate Governance Principles Communique (CGPC).
• The CGPC requires listed companies to establish specialized committees for early risk detection and internal control mechanisms.
• It also outlines specific requirements for risk management, including the establishment of early risk detection committees and annual reviews of risk management practices.

Obligations

All undertakings operating in Turkey are subject to relevant risk and compliance obligations. Key risk and compliance management obligations include:

• Early Risk Detection: Undertakings must establish early risk detection committees or internal control mechanisms to identify potential risks and take necessary precautions.
• Internal Audit: Undertakings must conduct regular internal audits to ensure the effectiveness of their internal control systems.
• Risk Management: Undertakings must develop comprehensive risk management policies tailored to different types of risks, including:
  • Interest rate risk
  • Treasury risk
  • Credit risk
  • Indirect country risk
• Compliance Monitoring: Undertakings must monitor compliance with regulatory requirements and industry standards.

Standards

Turkey has implemented several international standards and guidelines to ensure compliance with global best practices. These include:

• The Code on the Protection of Personal Data, which outlines specific requirements for data protection.
• The Corporate Governance Principles Communique, which sets out detailed guidelines for corporate governance and risk management.
• Listed companies are required to adopt universal standards in terms of:
  • Human rights
  • Moral standards regarding the environment, consumer rights, and public health
• They must also disclose social responsibility activities with environmental or social aspects in their annual reports.

Conclusion

Turkey’s compliance risk management landscape is shaped by a complex web of regulations, guidelines, and international standards. Businesses operating within this space must prioritize early risk detection, internal audit, risk management, and compliance monitoring to ensure continued success and maintain a strong reputation.