Is It Possible To Be Compliant and Competitive?

There is no doubt that developing markets present enormous growth potential. But with these opportunities come challenges of operating in emerging markets where corruption, illicit trade and organized crime are commonplace. How does an established, legitimate business stay competitive and compliant when operating in such locations? 

This is of increasing concern to corporate leaders, according to Ernst & Young's "European Fraud Survey 2011," which found that two-thirds of employees said bribes were widespread in their countries, and one in five felt it acceptable to pay bribes to win business. In the firm's most recent global fraud survey of corporate leaders found that while more than half of respondents plan to grow within the next year - especially to Latin America and the Far East where corruption is perceived as commonplace - two in five rarely perform fraud or corruption due diligence. 

After all, compliance, audits and legal can be extremely expensive functions - costs that sometimes feel hard to justify, especially when competitors are trying to gain a competitive edge in overseas markets by simply following - sometimes loosely - local business practices. But staying on the up-and-up in every location where you do business ultimately makes sense in the long-run, says Andrew MacKinnon, Head of International Casualty, Zurich Global Corporate in North America. 

"That compliance and competition intersect one another is the gist of the challenges that each of our customers is dealing with," MacKinnon says. "It may be a bit more expensive on the front-end to ensure your company is compliant, but if you're not adhering to local or international regulation, it's not a matter of if you'll be caught, but a matter of when."

MacKinnon says that Zurich, a global insurer with many multinational customers, has seen clients' questions and concerns shift from a perspective focusing primarily on price to one that now incorporates a higher level of interest in compliance, especially from a corporation's brand perspective. "Being found for non-compliance in a country where you're doing business is not the type of headline you want to have," he says. 

To wit, National Western Life, headquartered in Austin, Texas, in November was fined by Brazilian regulators a record $6.2 billion for violating local laws about selling life insurance - news which made local and international headlines. And while some nations are more highly regulated than others, in the long-term there is no location that will be immune from ethical business practices. 

"Some emerging markets in Africa, Southeast Asia and Latin America still have a freewheeling, lax mentality regarding compliance," MacKinnon says. "However, as time goes by, these areas are becoming more affluent and more conscious of issues associated with regulation and tax income. Hence, companies coming into any marketplace, whether in mature, developed markets or emerging ones, need to make sure they are adhering to all local law and business requirements." 

Key compliance points when operating globally: