UK and Ireland ranked amongst the least complex

Whistleblowing and Cyber Security top the compliance agenda of multinational boards

For the second year running, Argentina has been ranked as the most complex country for multinational enterprises to do business in according to TMF Group’s Global Benchmark Complexity Index.

The far-reaching annual study by TMF Group, a leading provider of global business and compliance services, has ranked 81 jurisdictions across Europe, the Middle East, Africa, Asia-Pacific and the Americas according to how complex they are to do business in from a regulatory and compliance perspective.

According to the findings, South America was found to be the most complex region to operate in, accounting for the top three places and half of the Index’s top 20, including Brazil, which climbed 15 places to number two in the rankings.

The high levels of government bureaucracy and red tape are cited as key reasons for making the local business environment in Brazil extremely challenging. For example, it can take around 54 days of work to start a business in Brazil compared to just 6 days in the United Kingdom.

The UK (including the Channel Islands) and Ireland are ranked amongst the least complex places to do business, alongside Australia, Hong Kong and New Zealand.

Ireland has retained its place in the top three least complex business destinations (79^th out of 81) for the second year running thanks largely to its common law framework, stable political environment, strong legal framework and pro-business attitude.  The enactment of the Companies Bill in early 2015 is expected to simplify its environment even further and initiatives such as the Knowledge Development Box, which will enhance Ireland’s onshore intellectual property regime, will ensure Ireland remains one of the most popular destinations for international business.

Results summary:

• Argentina (1^st), Brazil (2^nd) and Bolivia (3^rd) are ranked as the most complex
• Poland (7^th) is the only European country to feature in the top 20 despite significant reform, thanks in part to systems and laws inherited from the former Soviet Union
• Also in the top 10 were the United Arab Emirates (4^th) and the emerging economies of Korea (5^th), Indonesia (9^th) and Thailand (10^th)
• Ireland (79^th), Hong Kong (80^th) and Jersey (81^st) ranked as the least complex

The research identified local legal systems as a key driver in the complexity of regulatory environments.  Those countries that operated a civil law framework, including many South American countries, were typically ranked higher than those where common law is employed.

Other drivers include economic and political turbulence such as the recent presidential elections in Indonesia and the formation of a new parliament in Thailand in June 2014.  There were also significant changes in the global business environment and an increase in the compliance requirements shouldered by organisations, including FACTA, anti-bribery and corruption, the OECD Base Erosion and Profit Shifting (‘BEPS’) Project and changes in international company law.

In terms of trending compliance topics over the course of 2014, whistleblowing and cyber security featured the most heavily.  Whistleblowing programs are increasingly being implemented by multinational companies as they seek to raise their global corporate governance standards and identify and address weaknesses across their global operations in order to defend stakeholder value.

Commenting on the findings, Thorold Youngman-Sullivan, Global Head of Corporate Secretarial Services at TMF Group, said: “The burden of managing various international entities continues to be a major headache for multinational companies and their boards of directors.  Growing internal and external stakeholder pressure, changing regulation and the continued expansion by multinationals into new territories have all added to the compliance responsibilities shouldered by their in-house teams. 

“As part of this, certain jurisdictions have changed significantly their complexity ranking from the previous year as new rules come into force, meaning that there are an increasing number of potential pitfalls waiting for those firms expanding into new territories without sufficient knowledge of the local landscapes.”