Multinationals are targeting further international expansion against a backdrop of growing regulatory scrutiny. As they look to Europe, APAC, or Latin America, what do they need to know?
Some 60% of general counsels (GCs) at multinational organizations worry about cultural differences and poor communication when dealing with overseas entities, according to CSC’s General Counsel Barometer 2023 report. And nearly as many (58%) are concerned about reputational damage stemming from non-compliance with local rules. At the same time, we found that a significant number (41%) of multinationals plan to expand internationally this year—and they named the Middle East, Europe, and Asia as their primary areas of interest.
No two jurisdictions are the same, and regions have different priorities and different ways of doing business. The different regulatory requirements and unfamiliar ways of doing business are now of primary concern to GCs and in-house legal teams. Untangling these local issues can be a daunting task, but a crucial one as GCs work to keep large portfolios of global entities in good legal standing.
Regional variations in entity management
Different global jurisdictions have their own laws, types of laws (civil or common), as well as differences in their bureaucracy and regulatory framework. The burden of understanding these vast regional differences is the responsibility of GCs, who need to know the details of doing business in every jurisdiction in which their organization operates, whether that’s within their headquartered region or across the globe. To make matters worse, the compliance environment is constantly evolving around the world as individual jurisdictions switch focus, undergo political shifts, or work to catch up with each other.
At a high level, we can see that Europe’s focus over the past two or three years has been on increasing transparency, anti-money laundering (AML), and cracking down on tax avoidance. To some degree, these are global concerns as economies shift from traditional industries to digital platforms and eCommerce.
APAC is a diverse region with far more mature compliance frameworks in some countries than others. “In Europe, too, despite the EU’s statutory umbrella, corporate regulations—for example, the Ultimate Beneficial Owner (UBO) register—can be implemented very differently,” says Sebastiaan Donner, CSC’s executive director for Corporate Services in the Netherlands.
In the Americas, and Latin America specifically, AML is a key priority and even presidential elections can play a role in whether or not to expand to a certain jurisdiction. The Americas has a history of dramatic political shifts, creating uncertainty for business.
Around the world, such shifts can have a huge bearing on a GC’s administrative burden and affect everything from employment laws to know your customer (KYC) requirements.
Global politics: A worldwide challenge
The political climate is unpredictable by nature, but for multinationals with a portfolio of subsidiaries, some global consistency in regulation, tax, AML, KYC, employment, and data protection would be beneficial. Unfortunately, it isn’t likely any time soon.
Data protection is a case in point. “Europe’s General Data Protection Regulation (GDPR) legislation is seen as a benchmark for the governance of data, but a number of APAC countries are currently implementing their own data privacy regulations,” says Jack Yan, general manager for CSC Shanghai.
As a result, multinationals now face the challenge of creating data protection strategies that use GDPR as a benchmark but take a host of local refinements into account. These external factors—and there are many—add to the complexity of business for in-house legal teams, who also face significant internal challenges. Creating compliance strategies that meet the approval of a wide range of internal stakeholders can be a formidable task.
“It’s not just external pressures,” says Rogier Bronk, Global Subsidiary Management leader for CSC Americas. “Legal teams are trying to navigate a complex internal environment too. Making sure everything is centralized—or at least that there’s a centralized point of contact—is far from easy.”
Tax and finance departments may have their own global structures in place and their own international relationships. Mergers and acquisitions throw different ways of doing things into the corporate mix. Coordination of stakeholders is a time-consuming but necessary skill that requires considerable diplomatic acumen.
It’s a convoluted picture—and GCs naturally seek simplicity and consistency wherever they can.
Choosing the right outsource partner
Ultimately, the key to success is a streamlined central process that creates a minimum standard of entity management applicable to any jurisdiction. This can then be combined with local expertise to tailor processes for national regulations and cultural norms.
It’s a major undertaking that requires manpower, technology, and focus. GCs and in-house legal teams have many other tasks, but an outsource partner like CSC can provide the framework for efficient entity management.
We can collaborate with different internal stakeholders and help multinationals navigate language barriers, cultural differences, and regulatory nuances in more than 140 jurisdictions in which we operate. Choosing a partner like CSC—which can help create a consistent global service—can ultimately reduce some of the administrative runaround in navigating these vast regional differences for in-house legal teams, ultimately affecting the bottom line.
For more insights into the challenges GCs face today and how CSC can provide guidance, download our General Counsel Barometer 2023 report.
CSC offers a global solution for subsidiary governance. With capabilities in more than 140 jurisdictions, we’re able to do business wherever our clients are—something we accomplish by employing experts in every business we serve.
With CSC, you work with one provider, with centralized activities and a dedicated team in your time zone, alongside in-country experts.