August 8, 2014 Multinational risks
In July 2014 Strategic Risk in conjunction with AIG issued a report looking at the key risks faced by organisations which are looking to conduct business across the globe. One of the key messages to emerge from the report is that organisations cannot afford to be complacent with risk factors changing ‘all the time.’ The combination of technological change allied to political upheavals and other threats such as earthquakes or pandemics can make the international marketplace a risky place in which to be. But for those who pay attention to planning detail and have robust risk management strategies in place the rewards are there.
The section of the report which looks at risk factors across the Asian sector reveals one strong theme in particular which is repeated across other areas of the globe. This theme is the increase in regulatory expectations. Regulations which seek to reform business practices and outlook are having a profound effect on organisational attitudes and the expectations which are placed on boardrooms. For example in India corporate social responsibility is now an obligation on organisations over a certain size whilst in China strict anti-pollution measures have come into force. The effect of these regulations and others like them is to place an increased responsibility and liability on corporate directors.
Elsewhere anti-corruption legislation is resulting in sweeping changes to business practice. Brazil’s anti-corruption legislation is singled out in the report as being “particularly unforgiving” with cross-border enquiries playing an increasing part in investigations. Fraud too comes in for intense scrutiny with the frightening statistic from risk consultancy Kroll that across Africa on average 24% of revenues are lost to fraud. Political and terrorist activities too play their part in various sectors of the globe with organisations being advised to plan exit strategies and trigger points.
Whilst highlighting potential risk factors, the report also seeks to provide solutions. With AIG as the sponsor insurance is well covered but sound advice such as using local contacts, taking advice from someone on the ground and keeping risk plans constantly under review also feature. The recommendation to take advice from a local specialist is particularly pertinent wherever a business seeks to set up a local subsidiary even if that subsidiary is in one of the less volatile areas of the world such as the UK. Elemental CoSec is proud to be a member of the government’s UK advisory network which seeks to assist organisations looking to set up a subsidiary within the UK. We provide advice on company formation, tax and accounting as well as guidance on local employment and other regulations which might impact business seeking to set up new companies, subsidiaries, or holding PLCs within the UK.