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Here Are The Worst Business Risks In Southeast Asia

June 21, 2018

Via Wikimedia Commons.

As the world’s largest companies head to ASEAN, a regional bloc with nearly half a billion consumers, their operations will be tested by local markets. Whether it’s culture or custom, businesses that control leading brands or specialize in niche services have to adjust to an environment that isn’t quite like home. One of the biggest disadvantages for companies that want to thrive in Southeast Asia are fallible public authorities and weak institutions.

This breeds potential risks for investors and managers who, no matter how optimistic they are, need an honest appraisal of what can harm their bottom line. Here’s a rundown of the worst a company might face if they’re not careful.

Corruption

With the exception of Singapore, the countries that make up the ASEAN are still developing economies with mediocre-to-poor competitiveness. Business processes might sometimes be on par with global standards, but this isn’t the norm. In fact, multinationals who want to enter specific markets must anticipate public officials either stonewalling their efforts or soliciting bribes. It isn’t out of the ordinary to jump through administrative hoops or having to enlist well connected middlemen.

Fraud

One particular risk investors and multinational businesses must be careful of are the very partners entrusted with launching operations in a country. It’s not enough to establish a working relationship just because the partner or their associates were recommended by friends or have “track records.” It’s very common in many parts of Asia for anointed middlemen or proxies to be frauds with criminal intentions. That, or they make themselves out to be something they’re not.

Security?

Investors looking for opportunities in Southeast Asia need to do their homework. Unfortunately, this isn’t the norm either. Whether it’s acquiring property or outsourcing a business process there must be constant awareness of the dangers these investments might run into. If the plan involves launching a joint venture or a regional office there needs to be a crisis management strategy in place for both in-country executives and their staff. It’s best if threats to the bottom line are articulated and prepared for.

IP Theft

Whether it’s a global retail brand or a manufacturer moving operations to an emerging market, there’s a possibility their goods aren’t just stolen but counterfeited and reverse engineered. Intellectual Property (IP) theft is endemic across Asia, where dismal enforcement and outdated laws encourage this type of activity. If companies have no access to law enforcement or any local representation, fighting business partners and counterfeiters who steal IP is almost impossible.

The specter of financial and reputational losses caused by IP theft should be enough motivation for owners and patent holders alike to have countermeasures in place when it happens.

Laziness

If local executives and managers don’t possess sufficient local knowledge or even just a few trusted contacts, they’re going to make poor decisions that undermine the operations they lead. Business risk is a broad category that involves everything from carelessness to violent crime. But excuses can’t cover losses and a company’s leadership must be informed of what’s happening with their competition, the economy, politics, and the threats both imminent and far-fetched that may harm the enterprise.

When neither caution nor foresight drives a leader’s thinking, they’re being lazy. And laziness is a symptom of a bigger problem.

Not Caring Enough

If an investor wants to launch a business in an emerging market one of the best strategies they can pursue is building a local network. These contacts are supposed to be invaluable when getting the operation off the ground. Another sound strategy is hiring either a seasoned consultant or a lawyer–maybe both–for occasional troubleshooting. It won’t hurt to have a security professional on call as well if certain risks are an unavoidable possibility.

Of course, not caring about these have to’s is a recipe for disaster.

Multinationals and investors who want to better navigate the business landscape of Southeast Asia should have a risk consultancy on their side in case the shit hits the fan. Adsum Risk Consulting or ARC is one firm whose local knowledge and vast experience are indispensable in a very exciting region where economic growth is soaring.

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