Managing Multinational risks at the local level

Insight, Perspectives

This interview of José Manuel Dias da Fonseca was first published in

Hundreds of pages could be written about the various risks faced by multinational companies. One area of concern for all these organisations is how to ensure they promote their company culture and deploy established business processes in the various countries they operate while adjusting to the local market conditions and social landscape.

In their endeavour to expand into new regions, companies advocate a keen focus on staff and technology as critical assets, so many are investing heavily in both talent management and information technology to ensure they remain at the top of their game in their industry. As a result the associated risks for multinationals are both broad and increasingly complex.
There are significant business opportunities in emerging countries such as Brazil, India, China and Russia, as well as regions such as Africa and the Middle East. One of the main challenges organisations face lies in being able to match local business opportunities with the right skills and expertise in countries that often have a shortage of qualified workers. By the same token, companies need to adapt to local market conditions while keeping their identity and mode of operations, as well as making sure local employees are trained to acquire company knowledge covering corporate culture and values and products and services.

Communication across time zones
Businesses need to implement a better way for employees to communicate from various parts of the world and across different time zones. Besides the technology aspects and the local infrastructures, which could reveal critical issues in certain regions, language is also important. There is a need to strike a balance between using the local language and the global enterprise’s established culture and jargon which could, in some cases, override the country’s culture.

Companies will typically rely on a mix of expatriates and local employees to ensure they are operating within the company policy, adapting to the local market conditions and training the local staff accordingly.

Another important challenge faced by multinationals is security. Large business opportunities exist in politically unstable countries and as a result, these create serious security and business continuity concerns. It is an imperative for all organizations to alleviate these risks, protect expat employees and ensure business continuity should threat levels require these staff to be removed from the country in case of serious threats, such as the events we have witnessed in the Middle East over the past few years.

Social differences
Social inequality and unethical behavior are a rising concern for all multinationals. There are still major differences in employee benefits programmes across various countries and a real need for a strong and global company culture. Many companies aim to homogenise the benefits coverage provided to their employees around the world, but this remains a daunting task and requires a long-term implementation and often major adjustments to avoid action by unions.

Indeed these initiatives, as well intentioned as they sound, require effective communication with the workforce at the local level; otherwise, workers could interpret them as the first step of losing their employment. Ethical values are usually a challenge to sustain in companies operating in regions where corruption is embedded in the way business is conducted and so unfortunately is difficult to avoid.
As far as technology is concerned and in addition to the growing risks of cyber liability and data breach, multinationals are also facing local infrastructure difficulties in emerging countries.

As multinationals expand their horizon to follow the global business opportunities, they will need to analyze, map and mitigate their risks, acquire in-depth knowledge of the countries they operate in and enforce the core values of the company while balancing the need to respond to the nuances and culture of the individual territories in which they operate.

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