Dean offers preventive advice that is designed to identify and manage legal, political and reputational risk- the risk that a multinational’s strategic assets, relationships or personnel could be put in peril. Dean’s anticipatory sense has been honed through years of global work in crisis management and reputation management.
The legal and political risks of investing in the emerging markets have always been acute. State institutions in these regions are often severely compromised to the point that they are unable to properly safeguard a multinational’s property rights.
It is important to note that investment risk has increased suddenly and dramatically in mature markets since the financial collapse of 2008. This pivotal event has precipitated a tidal wave of strict government regulation, cut-throat competition and structural changes in all market sectors.
Risk minimization is highly dependent on timing. Dean’s experience has taught him that the critical time to minimize risk is from the outset- when the foreign investment is first made in the emerging market or the mature market. The multinational should develop and implement an upfront risk management strategy that incorporates the following elements:
- A small monitoring team should be formed and empowered when the foreign venture is being established. The task force should include in-house and outside specialists at the local and the international level. It should be given the mandate to constantly track the political and legal developments in the local market that have a bearing on the commercial enterprise’s risk profile. The group should also have the authority to make recommendations for ongoing protective measures that are designed to stave off any potential threat as soon as it emerges. This kind of oversight is necessary given the intrinsic instability and unpredictability of the investment environment; and
- Highly customized programs for legal governance, risk management and compliance should be developed and internally enforced. These programs should go well beyond the standard form checklists that have been slavishly and uncritically applied without regard to the unique conditions that prevail in the local market. The compliance programs should be custom built for each investment. Furthermore, they should be regularly modified to take into account the ever-changing conditions in the local market.