Look Before You LeapManaging risk in global investments |
As North American companies continue to explore growth opportunities abroad, most notably in emerging markets, compliance and integrity risks appear to be rising sharply.
Whether this foreign activity involves acquisitions, investments, or other business relationships, such as joint ventures, its deployment in regions often previously unknown has raised the stakes for corporate strategists and compliance officers.
To gain greater insight into this issue, Deloitte and Forbes Insights conducted the 4th annual Look Before You Leap survey. Participants included more than 500 business professionals at companies in the United States, Canada, and Mexico with a focus on surveying companies in the financial services industry. Participants represented a wide range of industries, with 39 percent of the respondents in the financial services industry, including both financial buyers, such as private equity firms and hedge funds, and strategic buyers.
Key survey findings
- Almost two-thirds (63 percent) of total survey respondents identified Foreign Corrupt Practices Act (FCPA) and anti-corruption issues that led to an aborted deal or a renegotiation over the past three years.
- A clear majority (60 percent) of respondents said that they have either pulled out of a transaction or adjusted deal pricing to reflect compliance and integrity-related issues.
- China is highest on the list of countries or regions ranked according to concerns about the potential for compliance and integrity-related issues when doing business. More than 80% of respondents said they were significantly or somewhat concerned about China.
- Entities from Mexico appear to be very finely attuned to compliance and integrity due diligence issues, and highly confident in their ability to meet the challenges.
Focus on financial services
By the very nature of their business, banks, brokerage houses, insurance companies, and other entities dealing in money should be especially careful when doing business outside of North America. Financial services firms made up almost 40% of the survey universe and the more interesting results from this sector are as follows:
- Almost two-thirds of these firms have identified an economic and trade sanctions issue that caused a transaction to be discontinued or renegotiated over the past three years.
- Nearly half (45 percent) of financial services respondents reported finding issues related to ineffective or limited scope of sanctions screening procedures, systems, and controls.
- More than two-thirds (68 percent) of financial firms identified deficiencies in anti-money laundering (AML) and terrorist financing compliance controls that would require significant remedial attention.
- Nearly 80 percent said they conduct very or somewhat detailed due diligence on the compliance programs and controls of acquisition targets or potential partners.
This report discusses some of the key compliance issues facing North American companies as they seek to increase their footprint abroad, and offers guidelines that might help foster the compliance process.
Read the complete “Look before you leap” survey report, below, to learn more about the survey findings.
About the survey
Deloitte contracted Forbes Insights to conduct a survey to gain greater insight into the issues of compliance and integrity risks that are increasing as a result of growth opportunities abroad. The survey was conducted online from May 11, 2010 to June 8, 2010, and was completed by more than 500 respondents from companies in the United States, Canada, and Mexico.
As used in this document, “Deloitte” means Deloitte LLP [and its subsidiaries]. Please see www.deloitte.com/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries.
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Look before you leap: Managing risk in global investments
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