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Increased cybersecurity investigations, heightened ESG regulations and spike in retrenchments fueling an increase in litigation risks for Singapore companies in 2024 | Newsroom | #hacking | #cybersecurity | #infosec | #comptia | #pentest | #ransomware


  • 77% of respondents expect the number of disputes in 2024 to either stay the same or increase.
  • Heightened Cybersecurity & Data Privacy (65%) and ESG (61%) regulations are fueling an increase in litigation risks for companies in Singapore.
  • Employment disputes have also emerged as a major concern, tripling from last year (49% versus 13% in 2023).
  • Only 19% of respondents were fully or very confident in their organization’s current level of preparedness for litigation.

A rising tide of regulatory scrutiny and stricter enforcement is pushing Cybersecurity & Data Privacy and Environmental, Social & Governance (ESG) concerns to the forefront of legal challenges faced by Singapore’s largest corporations, according to the latest research by Baker McKenzie.

Employment disputes have also emerged as a major concern, tripling from last year (49% versus 13% in 2023) due to changing regulations and economic factors.

The survey conducted among 150 senior legal and risk leaders at large corporations in Singapore with annual revenues exceeding USD 500 million revealed that 77% of the respondents expect the number of disputes in 2024 to either stay the same or increase, while almost two-thirds said that an external investigation arising from cybersecurity and data breaches (65%) and ESG-related disputes (61%) presented a risk to their organisation.

Nandakumar Ponniya, Principal and Asia-Pacific Head of Dispute Resolution at Baker McKenzie Wong & Leow, said, “Singapore corporations are finding themselves having to adapt to a dynamic regulatory landscape. Critical areas like cybersecurity and ESG are seeing increased scrutiny from regulators, aligning with international standards. Additionally, our latest survey also reveals a notable spike in employment dispute concerns, influenced by economic factors. Despite these heightened risks, our study revealed that only 19% of respondents were fully confident or very confident in their organization’s level of preparedness for litigation, suggesting room for improvement in preparedness.”

Cybersecurity & Data Privacy Disputes

82% of respondents in Singapore are concerned about external investigations generally in 2024. Cybersecurity & Data Privacy disputes top the list of concerns for external investigations, fueled by rising cybersecurity standards, increase in data privacy regulations and stricter reporting requirements for organizations. The surge reflects the growing complexity of Singapore’s digital landscape, which ranked among the most connected globally.

Among the Cybersecurity & Data Privacy-related disputes, more than half of the respondents identified operational disruptions (59%) and external cyber attacks (57%) as the top risks for their organization.

The rapid rise of artificial intelligence (AI) technologies is both driving economic growth and raising cybersecurity red flags for the nation state. Recognising AI as the next frontier for its digital economy, the Singapore Government launched the Singapore National AI Strategy 2.0 in 2023 to strengthen its AI ecosystem as the rise of sophisticated Generative AI models sparked worries about potential misuse ranging from malicious cyber attacks to misinformation.

To address these emerging threats, the Cyber Security Agency of Singapore (CSA) has proposed amendments to the Cybersecurity Act. The proposed changes expand the remit of the Cybersecurity Act beyond just critical infrastructure, to include foundational digital infrastructure (such as cloud service and data centre providers) and entities of special cybersecurity concern. In addition, reporting requirements will be expanded and, generally, may require reporting of incidents that occur to computers under the control of a supplier to the regulated entities.

Meanwhile, various governmental and regulatory bodies are issuing guidance on ethical AI use for businesses across industries, which include initiatives like the Draft GenAI Framework, Model AI Governance Framework, AI Verify, Veritas Toolkit 2.0 and the Advisory Guidelines on the Use of Personal Data in AI Recommendation and Decision Systems.

Andy Leck, Principal and Head of Intellectual Property and Technology at Baker McKenzie Wong & Leow, said, “Our survey continues to highlight cybersecurity and data privacy as top concerns for corporate investigations. The trend is likely to persist as the widening use of AI technologies will create a dynamic regulatory environment, where Singapore companies will find themselves having to navigate a patchwork of international regulations and emerging risks.”

Environmental, Social & Governance Disputes

 

While not yet mirroring the surge in ESG disputes in the West, concerns over ESG compliance is on the rise in Singapore. Our survey reveals growing pressure on Singapore business leaders and lawyers, with 76% citing climate change as a top environmental risk and 55% worried about extreme weather events. This coincides with a recent surge in ESG regulations in Singapore as well as some global regulations that may have an effect on supply chains throughout Asia Pacific.

Leveraging its financial hub status, Singapore’s central bank and financial regulator, the Monetary Authority of Singapore (MAS), is aiming to play a leading role in the region’s transition to a low-carbon future. Their two-pronged push-pull approach tackles both sides of the coin: strengthening the financial sector’s resilience to environmental risks and promoting green finance innovation.

The MAS’ Guidelines on Environmental Risk Management for Banks, Asset Managers and Insurers (ERM), which came into effect in June 2022, seek to clarify and align environmental risk disclosures by financial institutions to international frameworks like the Task Force on Climate-Related Disclosures (TCFD) and the International Sustainability Standards Board (ISSB), ensuring greater transparency and accountability. Additionally, the Accounting and Corporate Regulatory Authority of Singapore (ACRA) recently announced the introduction of mandatory reporting in relation to Scope 1 and Scope 2 greenhouse gas emissions (GHGs) for large non-listed companies from 2027, with the possibility of this expanding to Scope 3 emissions from 2029.

Richard Allen, Local Principal, Dispute Resolution and International Arbitration at Baker McKenzie Wong & Leow, said, “The growing concerns around ESG dispute underscores the reality that companies today operate in a globally interconnected marketplace where environmental, social and governance concerns are no longer just a local compliance issue, but a potential international litigation risk. The widening scope of ESG disputes that cut across transition challenges, human rights and social responsibility, necessitates continuous evaluation and improvement of polices and reporting practices.”

 

Employment Disputes

 

Employment-related disputes have emerged as a significant risk. In the Asia Pacific region, the increased risk may be attributed to three broad key developments: (i) restructuring or reorganisation activity; (ii) changes or developments in anti-discrimination or harassment legislation as well as heightened awareness of anti-discrimination or personal rights; (iii) heightened awareness of ESG.

Economic headwinds in 2023 have contributed to the rising concerns in employment disputes. Retrenchments more than doubled in 2023 compared to 2022 largely due to restructuring or reorganisation, according to advance estimates released by Singapore’s Ministry of Manpower (MOM). Following this trend, restructuring/reorganization (40%) and severance agreements (38%) were the largest areas for employment disputes for respondents in our study. MOM has recently said it will be developing guidelines on reasonable use of restrictive restraint of trade clauses for retrenched employees aimed at supporting fair employment practices.

The Singapore Government is also actively reforming the employment landscape through a series of changes to the workplace fairness framework aimed at strengthening against workplace discrimination and improving worker rights. In February 2023, the Tripartite Committee on Workplace Fairness released interim recommendations for a new Workplace Fairness Legislation. Following that, after consultation and engagement with the relevant stakeholders, the Tripartite Committee issued its final report, which the Government has accepted in August 2023. Once enacted, this legislation will further emphasize the importance of adhering to fair employment practice.

There is a growing trend for pay transparency amidst a competitive job market, and the demand for fairness and diversity. As pay equity gains global traction, our survey findings also reflect growing concerns among Singapore organizations. 52% of the Singapore respondents anticipate equal pay/pay transparency as the top employment dispute risk this year.

Celeste Ang, Principal, Dispute Resolution and Employment practices at Baker McKenzie Wong & Leow, said, “Due to economic headwinds and geopolitical developments, there are increased restructuring and reorganization activity in the region including Singapore. Navigating the employment issues arising from such activity demands meticulous planning and attention, particularly in the face of heightened union, Government and media attention and risks of claims. Proactive legal counsel and a deep understanding of the differing legal landscape are essential for ensuring compliance and mitigating potential risks associated with employee transfers, notification, termination, and other employment-related aspects. Another area to watch is the introduction of and changes to anti-discrimination and anti-harassment laws in the region. Of note in Singapore is the upcoming Workplace Fairness Legislation It will also be interesting to watch how regulations in pay transparency develop in Singapore. “

 

Litigation Preparedness

Despite the increasing litigation risks, organizations still feel unprepared for litigation. Only 19% of respondents in Singapore were fully confident or very confident in their organization’s level of preparedness for litigation – a drop from 25% of confidence in 2023. These results are indicative of the changing economic and regulatory landscape and the threats these pose against organizations as well as the increasing demands on organizations and their ability to keep up.

Global findings from the survey revealed that the largest organizations felt slightly more confident than the smaller organizations: the figure was 25% for companies with turnover of more than USD 25 billion, but just 10% for those with turnover of less than USD 1 billion. 

Organizations globally also lack confidence in finding the right services for litigation and arbitration support. These services typically include document review, legal project management, translation, and transcription. Only 7% of respondents in Singapore were fully or very confident in finding these services compared to 10% of respondents with the same level of confidence in 2023.



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