COMPETING ON RISK MANAGEMENT IN EMERGING MARKETS

Major multinational companies are now looking on how they can diversify in emerging developing markets be it in Africa, the Middle Esat, Asia, Latin America, Russia. High performers excel at identifying and managing risks; in fact they increasingly use risk management as a competitive differentiator.

Working in emerging markets, companies are often faced with underdeeveloped infrastructure, weak protection of intellectual property rights, unpredictable regulation, and greater financial volatility. Most Western multinationals without a long history in the emerging world are ill-prepared to deal with the broader range and heightened levels of risk they face. Risk practices are honed for their home market or similar developed countries, and the major cost-cutting and organizational reshuffling in response to the downturn have left the operations of many companies vulnerable. Rapid internatinalization has left them further exposed; many have focused on the opportunity at the expense of the potential risk. For example, in an effort to quickly scale their business across borders, some have reduced the importance of their country managers in favor of product-led business units that span geographies.

At the same time, as the opportunities become more accessible thanks to new technologies and market liberalization, risk management can become a competitive weapon. To compete on risk, companies must strengthen their risk-management capabilities and this  should include government relations. They need to build their capacity to identify risks, assess the potential impact across the entire organization and stakeholders and monitor and mitigate the effects.

Growth is on the mind of executives everywhere. But most companies still need clear strategies that look beyond the fog of economic uncertainty and invest to achieve sustainable, long-term growth.

For certain emerging markets will take on an eevn greater prominence in the years ahead. For multinationals in many industries, emerging markets will be where the greatest opportunities lie, but also the greatest risks. Those companies that are quick to re-evaluate the size of the opportunity in emerging markets and organize themselves to seize it will be the best placed to compete.