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Eyes on the Global Prize: Navigating the Implications of Internationalization

The surge of internationalization creates opportunities and challenges for general counsels and their teams

In an era marked by globalization, life for legal teams is growing more and more complex as companies increasingly seek growth opportunities beyond their borders. Research we conducted amongst 121 general counsels (GCs) revealed that two out of five businesses planned to move to international markets over the course of 2023—with 28% looking to expand into the Middle East and 26% into Asia and Europe.

The shifting sands of international markets

While this surge of internationalization engenders a multitude of opportunities for companies, it also ushers in a wave of intricate challenges for their GCs and teams to contend with—including new regulations, the logistical complexities associated with managing a growing number of global entities, and governance-related concerns.

Indeed, over two-fifths of the GCs we spoke to were worried about coming up against these challenges in new regions, with the potential of inadvertent non-compliance weighing heavily on their minds. Reputation damage presented a major concern, with 58% flagging this as as their main worry, followed by the postponed or suspended ability to trade in that jurisdiction (19%), and receiving fines (14%).

Cultural barriers

When dealing with overseas entities, cultural differences, and poor communication were spotlighted as a key challenge and flagged as the single biggest obstacle to a company’s ambitions by a staggering 50% of respondents.

This is perhaps unsurprising when considering that nearly a third of those surveyed (31%) reported having already experienced a situation where a lack of local knowledge had tripped them up or caused a mishap—including missed deadlines, incomplete documentation, and language difficulties. One respondent admitted that a lack of adequate local knowledge had even led to the wrong information being given, resulting in financial loss.

It’s clear that not having boots on the ground has its consequences—including when it comes to developing long-term, trust-based relationships with the local regulators that help businesses avoid these mistakes. These relationships take time, commitment, and local know-how.

Different choices, different worries

The concerns raised by industry participants show that GCs know they need to work hard to stay ahead of the curve. There are fewer people in their offices, managing with fewer resources, working with a different set of rules since the pandemic to meet different and evolving responsibilities, and handling a whole host of different regulators with different processes.

But they don’t need to navigate this ever-evolving landscape alone, and the benefits of additional support are clear.

Those seeking help from an external partner—be it an entity management provider or corporate governance administrator—are far less likely to anticipate obstacles derived from a lack of local knowledge or communication.

Over half (56%) of those managing legal entity issues internally saw overcoming communication or cultural differences as a primary concern, vs 24% of those using an external legal entity manager and just 22% of those using a law firm. Moreover, 45% of those managing internally saw jurisdiction administration, regulation, and governance differences as one of their top worries, vs. 18% of those using an external legal entity manager and 15% of those using a law firm.

While the extent of any local presence will depend on the complexity of a firm’s operations in that jurisdiction, these figures speak for themselves. Having a trusted partner with local knowledge who can shed light on how to mitigate some of the most pressing concerns that keep GCs up at night is invaluable.

Given the high stakes involved, due diligence when researching and selecting the ideal partner to work with to manage global entities is vital—and well worth it.

To read more about our research, download The General Counsel Global Barometer 2023 Report.


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