Understand business risk in overseas markets

Last updated 19 March 2019

Exporting to some markets could expose your business to risk. It is your responsibility to be aware of and plan to avoid these risks.

Effective planning and management of potential risks, however, will allow you to:

  • capitalise on market opportunities
  • derive both value and commercial benefits from exporting with integrity

Bribery

Bribery is illegal but still widespread in many countries. It sustains a corrupt and hostile business environment and exposes you to risks.

Examples of bribery include:

  • unofficial, often known as facilitation, payments to get a faster service
  • offering excessive gifts ahead of an important business decision
  • levels of hospitality disproportionate to a business transaction

By operating with integrity you can:

  • maintain a strong and reliable supply chain
  • gain trust from governments, overseas partners and staff
  • avoid escalating costs, reputational damage and risk of prosecution

Online resources on how to do business with integrity include:

UK legislation

The UK Bribery Act applies to UK companies operating in, as well as outside of the UK. Your company or partners could be prosecuted if there’s evidence of giving or receiving a bribe or facilitation payment.

The UK Bribery Act creates a new offence: ‘failure to prevent bribery’ by the company or associated persons. Having ‘adequate procedures’ in place, such as clear policies and staff training, is a defence against being prosecuted for this corporate offence. The Ministry of Justice has guidance for commercial organisations on the procedures that can be put in place to prevent bribery:

The Modern Slavery Act encompasses all forms of contemporary slavery: human-trafficking, slavery, servitude, forced and bonded labour and the worst forms of child labour.

The UK has issued trade embargoes and sanctions on some countries.

Anti-corruption legislation in other countries

If you do business or have any kind of legal presence in the US, you may be liable under the US Foreign Corrupt Practice Act (FCPA) for bribery carried out in any other country.

The FCPA is similar to the UK Bribery Act except:

  • facilitation payments are not considered an offence
  • fines and penalties have some upper limits
  • it only covers giving, not receiving bribes

Visit the U.S. Securities and Exchange Commission for more information about the FCPA.

For information about anti-corruption legislation in other countries visit:

Due diligence checks

You must find out information about your customers and partners. This can be done by searching online using various service providers or by asking them directly.

Useful sources include:

  • local company registration services (equivalent of Companies House in the UK)
  • official websites, social networks and web searches using local language search engines
  • blacklists published by government authorities
  • bribery, Politically Exposed Person (PEP) and sanctions databases provided by third parties

You can ask for:

  • a certificate of incorporation, a recent bank statement and licences
  • references and CVs
  • their position in the supply chain
  • a review of their historical accounts

You should keep records of all due diligence activities. It is also worth speaking to experienced British companies that have already invested in a particular market. They may know local people and may be able to share useful tips about individual companies.

Online due diligence tools include the:

Look for warning signs of impropriety

You can avoid putting yourself and your business at risk by knowing what situations to look out for. Be especially vigilant when your customer, agent or distributor:

  • is reluctant to go through a due-diligence procedure or provide the requested documents
  • insists that you use specific suppliers without making a business case for this
  • requests a high commission or unusually large fees for your chosen market
  • is a close relation to a government official, also known as a Politically Exposed Person or PEP
  • refuses to have a written agreement or sign a contract
  • requests payments to be made into an offshore account, in cash or to a charitable cause

Supply chain mapping

Gathering information to map your supply chain is a critical part of modern business. Supply chain mapping can be used as a tool to manage risk and gain a commercial advantage.

Understanding the supply chain process allows you to:

  • determine the right price point for your customers and end consumers
  • calculate the impact of every price mark-up at each stage of the production and distribution process
  • spot signs of bribery or fraud such as high margins or unjustified costs