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Compliance challenges in foreign markets

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in Legal

The potential for business growth has changed tremendously in recent years. It used to be constrained to one country, whereby, based on your successes, you’d open up another enterprise in the same city, maybe more. If that proved to be profitable, you’d look beyond, to another part of the country and so on. Going global, while always at the back of the mind, was the stuff of dreams.

Today, that has changed. Success stories like that of Cath Kidston – whose eponymous “modern vintage” home furnishings company went from being a tiny shop in Holland Park, London, to a global enterprise – have inspired entrepreneurs to be ambitious and look further afield.

Moreover, as we touched upon in our article on globalising your website, going international is not just an imperative; it’s part and parcel of what you now do as a business.

However, going global is easier said than done. The multifaceted system that underpins international trade and overseas operations is inherently complex and, if you’re serious about embracing a worldwide outlook, you have to be confident that you’re at least in a position to appreciate the compliance challenges you may face.

Comprehending local regulations

Asking UK-based businesses about their biggest concern with operating overseas, Trade & Export Finance Ltd found in its annual survey that a large proportion of respondents (34 per cent) are fearful of misunderstanding local regulations.

This is no surprise as complying with governance and statutory requirements can be challenging enough. As such, having to contend with additional and international stipulations can be particularly difficult to take on.

“Different business cultures, legal environments and languages increase the risk of confusion when you trade internationally,” states UK Trade & Investment.

As an example, the government body notes that if you’re delivering a service in a foreign country, you are bound by local regulations. It may be that what is legal back at home is illegal elsewhere. You therefore need to know your market inside out before jumping into the deep end. If not, you run the risk of incurring financial penalties.

Again, it must be reiterated that expanding abroad, while full of opportunities, brings with it other challenges to overcome. The depth and breadth of cross-border compliance is substantial, extending into areas like tax, health and safety and even logistics.

“There are widely differing real estate laws, different cost structures, restrictive laws on opening hours, planning and construction that impede development,” Nigel French, chairman of international retail consultancy TRAUB Europe, was quoted by Retail Week as saying in 2014.

“Retailers need to gain local knowledge from outside the appointed realtor, especially in markets where there’s a combination of cultures, languages, shopping habits, employment laws and trading idiosyncrasies.”

Grasping the language

The inability to engage or operate with cultural sensitivity can have consequences that extend beyond costly brand damage, as HSBC found out a few years ago. As such, you need to be, in the words of the entrepreneur Glenn LLopis, “culturally intelligent”. You otherwise run the risk of getting into an unfortunate routine whereby you have to painfully build up trust again after another misunderstanding and, where compliance issues arise, persuade the relevant authorities – once more – that it was simply a mistake.

A similar level of intelligence is also required in terms of how organisations manage their documentation and carry out their communication efforts in various countries. While English remains the number one business language in the world, it is limiting to think that one language is suited to working overseas. In an increasingly globalised world, more people expect to be engaged in their primary language.

“Big multinational companies recognise the importance of language skills,” the Financial Times highlighted in a 2013 article on the “multilingual dividend”.

“Unilever estimates that up to 80 of the consumer products group’s 100 most senior leaders speak at least two languages. Standard Chartered seeks out bilinguals for its international graduate training scheme. These companies understand the functional benefits of having enough Mandarin-speakers to deal with suppliers in Shanghai, or French speakers sufficiently fluent to smooth relations with a customer in Carcassonne.”

More specifically, in terms of compliance, there is a need to go beyond multilingualism. There are, for example, ample risks with the “ambiguity of language”, especially in terms of the law. From a vague phrase to the wrong word to a wandering comma, seemingly simple mistakes can have a disastrous impact. They can nullify contracts, jeopardise deals and can land enterprises in a spot of hot bother with the law.

“If your business is one of the many that is spreading beyond its established comfort zone, then success will depend to a significant extent on being on top of the local situation,” Stephen Morton, head of multinational risk practice EMEA at AIG, said last year, in response to the International Trade Survey.

“Because this varies so widely across global jurisdictions, the key is to ensure full understanding of, and compliance with, individual territory regulations.”

In which case, you need a level of expertise that is likely to be absent in-house. Specialist language service companies have the reach, the experience and the authority to “fill in the gaps” and help you be compliant in new, overseas markets. Legal translation, to be more exact, is an area that warrants expertise.

The key message

Do your homework – compliance needn’t be a bugbear, but it’s something you need to plan ahead for.

After all, to transform your business from a domestic framework into one that is international – and fully geared towards multiple markets – is a drastic departure from a local approach. It takes time to get used to this level of change.

Going global is a different kind of ball game and, in effect, the same rules you’ve long adhered to no longer apply. Sticking with the sports analogy, it’s like having a ten-page rule book that is then superseded by one that is 100 pages long. That is simply the consequence that comes with operating in a new and demanding environment.

However, with a sound strategy and the right kind of support, there is no reason why you can’t go from being the new team in the league to the one that sets a new standard of excellence.

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