Uncertainty over the prospects for UK and European growth understandably dominate domestic headlines, but there is a far more positive story for multinational businesses. World trade is forecast by the Organisation for Economic Cooperation and Development (OECD) to grow by 5% this year, with many overseas markets performing strongly. Our experience here at TMF is that many businesses want to set up numerous offices overseas to make the most of these opportunities. The challenges for company secretaries when complying with the many and varied regulations for each country, however, can be potentially overwhelming. In the complex world of compliance, simplicity is in much demand.
There is little doubt that the difficulties of keeping track of numerous overseas compliance issues have increased significantly. Businesses with a large number of offices in different countries ideally need a global network to provide access to local knowledge across company secretary, accounting, legal, HR and payroll disciplines to help them get started, and then prosper, in their new environments. What TMF clients often ask is to take away the complexity of several sources of professional knowledge and replace it with a single point of contact, one which will help them win control and support consistency and clarity across their compliance requirements. The aim, after all, is to keep hassle to a minimum for our clients so that they can get on with what they are there to do- sell their services in new markets.
There are some major challenges for compliance for those with offices spread around the globe, the first challenge, particularly for younger high-growth multinational businesses, is the rapid proliferation of data required to keep on the right side of the rules. Technology provides some salvation: for those operating on a global scale, there is excellent company secretarial software (including Computershare’s GEMS, used by TMF) available for managing this data. Powerful technology, however, needs to be matched by reassurance over the way in which a client’s data queries are handled. Our experience shows us that a single point of contact is what any international business wants from an outsourced provider of compliance services. A company secretary and his or her team need to make sure that they have an account manager who not only understands the client’s objectives, but is able to communicate these effectively to local professionals on the ground.
The second challenge is to understand the business risks for multinationals in not having a centralised approach to compliance. Multiple overseas locations bring with them obligations to comply with lots of different requirements- not only company establishment but also statutory filings, accounts reporting, tax returns and local legal, HR and payroll obligations. And because these rules can vary greatly across jurisdictions, businesses are highly vulnerable to the risks of non-compliance, trading delays and legal liabilities. Again, management teams can be distracted from core business operations if compliance is not handled effectively. What is required is a consistent overview of myriad accounting regulations, corporate compliance obligations and the HR and salary rules to give a platform for performance.
The third challenge is for businesses to keep up to date with future compliance requirements. Inside the BRIC (Brazil, Russia, India and China) economies, for example, there are many new internal rules coming into force that need to be digested and acted upon, in order for those with overseas offices to prosper in the past, multinationals would have gone to the local law firm and asked for advice on the ground, but with a larger number of businesses setting up more overseas operation than ever before, this can be very costly. It also risks variability in the value, quality and independence of advice given. It is vital that any outsourced compliance operation is – and is seen to be – of consistently high quality and non-partisan in its recommendations.
To achieve excellence in the face of these three challenges is what TMF is about. As the global outsource experts in compliance issues, our starting point is to practice what we preach. The global nature of our own business (we have 100 offices in 75 countries) gives us a scale to offer an effective, wholly owned global network – and all the expertise and experience contained within – directly to our clients. It also allows us to make the most of the sophisticated software we use in running our own businesses to do the same when handling the numerous data requests for our clients. We focus on corporate secretarial, accounting, HR and payroll outsourcing across the world, including those markets where businesses are more likely to be expanding in the years to come, such as China. So rather than multinationals having to use multiple service providers, we can help in every country, by consolidating to a single service provider with a single point of contact responsible for dealing with local offices.
Along with the size of our network, TMF is also the global leader in terms of the number and variety of businesses under its management. Our diverse international client base includes over 50% of Fortune 500 and FTSE 100 businesses. We provide services to all kinds of multinational companies; insurance and real estate companies, financial institutions, pension funds, listed and private companies.
Ultimately, cost will be a major driver behind the decision to buy outsourced global compliance services. A company secretary’s team is invariably seen as a cost centre and is always under pressure to limit the amount of resources it has to focus on compliance. In addition, many organisations, in spite of their international expansion, may be experiencing a recruitment freeze at home and may expect more overseas offices to be overseen by fewer numbers of employees. By outsourcing the challenges, company secretaries can save money and gain control of budget by investing in expertise which allows utilisation of literal resources far more effectively.
For any business expanding across international borders, the challenges of retaining full control over the proper compliance of local entities will always be immense. The proliferation of data, the need to limit exposure to a huge variety of compliance risks and an ever-changing set of rules are just three of the challenges, which left unmet will become overwhelming. Multinational businesses need to keep an iron grip on compliance issues to give their management a chance to focus on business performance. And when you throw the existing difficulty of culture, language barriers and differences in time zones into the equation, it’s perhaps not surprising that many company secretaries are now looking to outsourced providers to provide some simplicity of the complex world of compliance.
First published in the Company Secretaries Handbook 2012. Reproduced by permission of the Company Secretaries Network (www.cosecnetwork.co.uk)