emerging markets risk

Analysis

Strategies to enhance compliance and business performance in emerging markets

Winning the away game

Emerging markets provide a wide range of opportunities for growth-oriented technology companies, but operating in these high-growth areas has its challenges. Is your company doing enough to protect intellectual property and enforce regulatory compliance within emerging markets?

About the study

To better understand the importance of emerging markets to the IT industry, as well as the challenges of operating within them, Deloitte and the Alliance for Gray Market and Counterfeit Abatement (AGMA) conducted a survey in 2015 of leading multinational technology companies.

The respondents to this survey represented a cross-section of companies of various sizes, each with its own unique vantage point and perspective regarding emerging markets.

Download the study to learn more.

Areas of greatest concern

Responses to the survey, macroeconomic data, and trends all suggest emerging markets offer a significant opportunity for growth-oriented technology companies. Organizations often decide to engage third parties in emerging markets because it represents the path of least resistance. It gives them a way to scale quickly, as well as to save time and money by eliminating the need to invest in warehouse space, technology, transportation, and training.

While there is no substitute for having ready access to a resource network that is up-to-speed on local customs and business practices, engaging third parties in developing markets also exposes companies to heightened risks since these outside vendors have access to the crown jewels: the company’s latest and most coveted intellectual property.

Beyond IP/brand protection, the next biggest area of concern for survey participants is legal and regulatory risk. Challenges in seeing, and subsequently controlling, the actions that “associated persons” are taking on the company’s behalf thousands of miles away is one reason why companies rate bribery so high on the list of risks when doing business in emerging markets. The severity of the penalties is another.

Based on Deloitte field experience, working with third parties in emerging markets raises even more issues than these. Additional challenges include sales to embargoed nations as well as an intentional overproduction of goods to be sold through back channels.

emerging markets risk

Are companies doing enough?

The survey results highlighted several emerging-market risks that keep executives up at night. The results, however, go beyond illuminating the challenges associated with emerging markets to shed light on what technology companies are doing about them. In general, the survey findings suggest businesses may not be doing enough, especially since these risks may not only lead to additional expenses in terms of fines and legal fees but also to lost revenue and under-performance in markets that are key to a company’s overall growth strategy.

emerging markets risk

The path forward

Regardless of where your organization stands now, there are several leading practices that can help companies mitigate IP/brand protection and legal and regulatory risks, and increase the likelihood of improving the returns on their emerging market operations:

  • Put boots on the ground
  • Establish a strong central organization
  • Increase the number of touch points with partners
  • Retain focus on corruption and fraud in parallel with a wider compliance program
  • Invest in the right people
  • Leverage technology and tools
emerging markets risk
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