Dr Yusaf Akbar, Hult International Business School
Today’s managers face unprecedented uncertainty thanks to the volatile and ambiguous social and political climates in which they operate. There is an increasing sense that the magnitude and velocity of turbulence is rising and that the complexity and scale of change is accelerating like never before.
This is why, at Hult International Business School, we set out to research whether executives who had considerable experience in emerging markets, or who had grown up in these countries, developed different mechanisms to cope with turbulence, compared with managers who were relatively inexperienced or who had grown up in developed economies.
These days, change is the only constant
Increasingly, executives are required to develop businesses in countries which are institutionally weak; where the rules are opaque and regulations are difficult to predict. This is also coupled with broader shifts in socio-economic forces and technology.
Just take a look at what has happened in Egypt since the ‘Arab Spring’ anti-government protests took hold of the country; or in Turkey where an attempted coup failed or in Venezuela where anti-government protests were precipitated by a state of economic collapse. In fact, even countries once considered to be relatively predictable, such as Saudi Arabia, have become increasingly unstable as new, untested leaders have begun to exert an influence on government policy.
While in the past you may have been able to line up your political and legal resources in a certain way, that is now not a given. As businesses expand to regions further away (in economic terms), they are discovering that regulatory systems are simply not there. In the 1980s when globalisation started to take business across the Atlantic this wasn’t significant; now if you are moving into sub-Saharan Africa or Latin America the differences are vast.
Within these markets, rules and regulations are not always well developed, meaning leaders have no legal guarantees. If you have developed Intellectual Property (IP)in Germany and bring the patent to China, for example, you can’t expect to be legally safe, because the court system in China is not set up for defending IP. Thus, top managers need to not only master the market aspects of corporate strategy, they must also align business strategy with the corporation’s socio-political context.
It may seem like a cliché, but change really is the only constant. Particularly within unpredictable developing countries, executives can no longer rely solely on a series of conventional competitive weapons such as IP, technology and branding. In fast-changing industries with shortening product lifecycles and dramatically transforming competition, the capability to change quickly and continuously is vital for company survival.
Managers from uncertain environments cope better
Our research explored whether executives who have grown up within or had extended exposure to emerging markets, have capabilities which someone from a developed country does not possess, to help them cope with this kind of turbulence.
We began our exploration of socio-political turbulence in emerging markets.Our study drawing on comprehensive interviews with Director, MD and C-level executives, based in Africa, Asia, Latin America and the Middle East- identified differences in the way these leaders, from a range of backgrounds and environments, operate within these markets.
Overall, we found that managers who have had significant exposure to or who originate from emerging economies, have ways of managing uncertainty that those from developed countries simply do not have. People who have grown up in turbulent environments have a flexibility in mind-set: they possess agility of thinking, willingness to delegate, openness in knowledge sharing and recognition that in these emerging markets, compliance can slow things down.
In many of these markets you cannot always play by established rules of the game. Many multinationals, however, are (for the most part rightly) held back by company ethics codes. In these environments many executives feel hamstrung, as they can’t do what they need to get the job done, whereas competitors from other countries often have more flexibility.
One manager born in the Middle East, based in Dubai and operating across Africa and the Persian Gulf observed: “[T]here’s a lot of unwritten rules. When faced with uncertainty or turbulence, I don’t panic. It’s normal. We’ll just figure it out.”
Meanwhile, we asked a French manager who operates mainly in Africa whether she trusted staff to take decisions. She replied that she always makes sure to follow up on every single decision her staff makes because she is not sure they have made the right decision.
By contrast a manager born in Dubai, operating in the Middle East answered – “I give autonomy to my staff, as they are on ground so they can react faster. They have a local context and take quick decisions on spot.”
A South African manager working for a US security firm in Central Asia reported he is frequently frustrated by the HQ in the US constantly slowing things down due to compliance, whereas ultimately he would rather give autonomy to the team on the ground.
Managers from emerging economies also have an openness to experimenting and innovating in the way in which they engage with socio-political and regulatory stakeholders:
The Chief Innovation Officer of one of the world’s biggest firms in the retail industry with a strong emerging market presence stated: “I think that if you grow up in volatility […] you’re constantly pushed to think of ways to mitigate potential disaster in your future. You don’t get shocked by change or unrest”.
Executives unfamiliar with emerging markets struggle with agility
By contrast, executives relatively new to emerging markets tend to struggle with the need for agility, either constraining their teams and organizations with closer control over nonmarket affairs or taking considerable time to learn that flexibility and fast-learning are core features of successful nonmarket strategy in turbulent environments.
A senior executive from a European security firm operating in Africa told us: “I think I’m more traditional. My direct reports are younger than me so I feel that they don’t have enough experience so I prefer to check”.
Western European and North American executives seem to struggle with the contradictory situation of following rules and being flexible at the same time. Those from North America in particular tend to institutionally impose vertical control over their operations in emerging markets, to be seen to be complying with US rules on regulatory matters – with the implication that American corporates may be less agile faced with this turbulence.
A Regional Director for a large US engineering firm in oil and gas felt his initiatives were often slowed down by headquarters: “They’re probably pulling up the brakes and saying, ‘Stop.’”.
There also seemed to be a default response among these leaders from Western cultures:
When asked if he was willing to give gifts and offer his team autonomy to do this, an Austrian executive working in the automotive industry in China replied that he would “never do that in Austria.” This implied that he wouldn’t. However he recognised that this put him at a disadvantage, as his local competitors could do this in a heartbeat.
Three key skills to navigate turbulence
A failure to address this socio-political and regulatory turbulence can lead to lost opportunities at best, to catastrophic failures at worst. Ultimately companies will make bad decisions and these will feed through into overall performance. Developing skills to cope, drawing on a combination of agility, innovation and knowledge of the socio-political realm are key.
An executive working for large American technology firm operating in Saudi Arabia told us that things change very quickly there because the established order is being shaken up, meaning rules and regulations are changing on daily basis. So if you are in charge of importing technology it is almost impossible to predict activities, as you rely on a supply chain which can change in a matter of days.
For managers to successfully navigate uncertain environments such as this, we identified three key sets of skills they need to possess.
- Organizational and individual flexibility
The ability to change direction flexibly as the situation evolves and avoid rigidities in thinking at an organizational level.
- The ability to process new knowledge.
Being able to combine what you already know from experience, with new information coming through the pipeline.
- Innovation to manage the external environment
Quickly finding ways of doing things differently than you’ve done in the past.
Our research also uncovered a number of key lessons which can help organizations and individuals working within these markets:
Immersion is crucial
If you are working in a fast-changing environment, in which you haven’t grown up (meaning your reactions are almost subconscious), you need to place yourself within the environment itself, rather than observe it from a distance. Executives who have been sent from developed economies need to be more open to the turbulent contexts in which they are expected to operate and immerse themselves.
One Italian CEO of a pharmaceutical company in China, lives in a Chinese district and cycles to work (though he could easily have a driver), rather than living with expats in a compound. This gives him a true sense of what is going on, as he is immersed in Chinese society. Through doing this, he has been able to observe people and gain a deeper understanding of socio-cultural differences, which has helped him to succeed.
Organizations need to rethink the rules
Many of these findings speak to overall organizational set-up and attitudes, rather than just the individual. Ultimately organizations need to transform their mind-set around who should be at the upper echelons, as well as be more willing to work flexibly and rethink the rules of the game.
If, after very careful consideration, companies do decide to expand into these markets, it is critical to have managers who can drive business forward and cope with uncertainty. It is bad news for everyone – both individuals and organizations – if executives are not equipped with the right attitudes and skills. Agility and innovation in the socio-political realm are key to coping with turbulence in the nonmarket realm, as much as in more traditional business areas.
Actively seeking and training the right executives is key
These findings did not correlate with either the industry or the nationality of the executive interviewed –what really mattered was the executive’s exposure to emerging markets.
Ultimately, companies need to seek out and promote executives who have significant prior exposure to emerging markets. In particular, they need to look for managers who have grown up in these environments, since these people recognize and respond to turbulence much more quickly and pragmatically than executives from developed countries.
If they do identify high potential executives (particularly junior ones), companies need to give them full exposure to these markets as quickly as possible. This means that they will be able to build up a series of experiences and essential skills at an early stage, which will help them down the road as they become more senior.
There are so many gifted executives from these regions – at Hult International Business School we see a constant flow coming through the door – so it not enough for companies to say that they can’t hire them or are unable to find such people. They must actively go looking for them.
UK versus Australia – data regulation on both sides of the world
By Guy Hanson, VP, Customer Engagement, Validity
While consumer data privacy continues to be a hotly debated topic and many regions are still grappling with how to effectively regulate this area, companies are fast realising that there’s much to be gained by adopting stricter data practices, regardless of whether they’re required to by law or not.
In regions that have introduced strong data regulations, like GDPR in the EU, companies have demonstrated improved results from their digital marketing programs, including increased customer engagement, higher consumer trust, and greater return on investment. In fact, for marketers everywhere, GDPR has been an unlikely lesson in the commercial benefits of giving consumers greater control over their personal data. Marketers appear to be relishing the benefits that tighter regulation has provided, and in the DMA’s “Data Privacy: An Industry Perspective” report, almost 60% said they would like to see “more strict” data protection policy in the UK.
GDPR – from villain to hero
When GDPR came into force in May 2018, organisations across Europe were concerned about how they could continue to operate successfully under the tighter regulations. Many were worried that their marketing programs were going to be severely set back at the hands of the new laws.
A common concern for digital marketers in particular was their valuable email contact lists. GDPR enforces a requirement for subscribers to opt into email marketing correspondence. If they do not, the assumption is that they opt-out. Due to this, marketers had to choose whether to use “consent” or “legitimate interest” as their legal basis for processing personal data. Legitimate interest tended to be used when a customer relationship already existed, but it was where consent was relied upon that we saw many marketers having to chop away at sizeable email lists built up over many years. This is because consent had to be refreshed if the previous permission model had not met GDPR standards, for example a pre-checked box, and this resulted in many marketers effectively starting their lists from scratch.
However, despite their initial concerns, just one year after GDPR was introduced, businesses saw email marketing initiatives receive a host of benefits. The DMA’s Data Privacy report found that GDPR offered broader business benefits with almost half (49%) of marketers stating that consumer trust in the handling of their data had improved as well as nearly a quarter (22%) saying customer relationships had been bolstered.
On top of this, the DMA’s Marketer Email Tracker report noted an uplift against all major KPIs: increased deliverability (67% of respondents), open rates (74%), click-through rates (75%) and conversion rates (67%). Negative metrics that marketers want to avoid also reduced. Opt-outs and spam complaints were down by 41% and 55% respectively. This is hugely important as improved deliverability and lower complaints means companies have an in-built advantage when it comes to getting in front of their consumers.
The global legacy of GDPR
In many ways, GDPR has provided the blueprint for global data privacy regulations and many other countries and regions have either introduced (or are on their way to implementing) their own version of the tighter regulations. For example, the California Consumer Privacy Act (CCPA) is now in effect in the US. Despite some delays, Brazil’s Lei Geral de Proteção de Dados Pessoais (LGPD) is now live.
Even in regions where new regulations haven’t been introduced, the influence of GDPR is still being felt — with many companies in these locations choosing to be proactive in protecting customers’ personal data regardless. A great example of this is Australia.
Australia – an exemplar of data privacy awareness
Compared to other parts of the world like the EU, Australia has long had a more relaxed approach to data privacy. Its current privacy laws date back to the 1988 Privacy Act and have remained largely unchanged since then (outside of some specific legislation such as the Spam Act 2003). While the Australian Government is set to conduct a review of the Privacy Act — including a potential right for consumers to have personal information erased as is the case under GDPR — this won’t happen for several years
But despite having more relaxed regulations, many Australian companies choose to adopt strict data governance protocols. In fact, when it comes to ethical data practices, Australia is very much ahead of the curve without being legislated to do so.
The increase in the adoption of ethical data practices from companies in regions like Australia, where laws are less stringent, is indicative of growing global awareness around the commercial benefits of strong data governance.
By respecting privacy and using data thoughtfully, Australia has gained from one of the highest deliverability rates outside of Europe and Canada according to Validity’s 2020 Email Deliverability Benchmark report. Companies engender consumer trust and loyalty — the modern-day currency of business – and this has never been more critical than in recent times with the disruption caused by the global pandemic.
Building trust in an uncertain world
With a large chunk of the world now working, socialising, and conducting everyday life online, consumers need extra assurance that the products and services they access take their privacy and personal data seriously. A recent report by Cheetah Digital found that in light of privacy breaches, many consumers are changing their online behaviour including installing ad blocking tech, disabling location tracking, and deleting cookies regularly. At a time when there have never been more online options for consumers, losing their trust quickly results in lost revenue.
Despite what some may think, adhering to good data governance does not mean sacrificing valuable insights and innovation. As demonstrated by GDPR, implementing more thorough data practices results in greater engagement and more accurate customer insights which in turn helps businesses to innovate faster. This is why more and more companies are proactively adopting stricter data policies, regardless of their region’s regulations.
Furlough Fraud: genuine mistake or cheating the system?
As the furlough scheme comes to an end, many employers will be at risk of falling foul of its stringent and complex rules and potentially facing penalties for ‘furlough fraud’, but with the 20 October amnesty introduced by HMRC, companies that have made genuine mistakes have a chance to rectify them without being penalised. Walker Morris’ Gwendoline Davies, Head of Commercial Dispute Resolution, and Andrew Northage, Partner in the Regulatory & Compliance team, share the facts businesses need to know ahead of the deadline.
The furlough scheme – designed to support businesses who are unable to pay the salaries of their full workforce during the coronavirus pandemic – is set to come to an end this month and thousands of businesses have come under investigation by HMRC for falsely or mistakenly claiming whilst employees have been working as normal, part-time, or ‘volunteering’ their time.
According to research by legal rights app Lawya[i] in June, one in three furloughed workers were pressured by their employers to continue working for them and this ranged from being asked to check emails, to attending their physical workplace and, being pressured to ‘volunteer’ their time. In July, the Policy Exchange think tank warned that furlough fraud – whether genuine mistakes or wilful deception – could cost the exchequer between £1.3bn and £7.9bn[ii]. According to HMRC last month, the rate of fraud and error with regards to the furlough scheme currently sits between five and ten per cent and could total £3.5b[iii]; the tax body is currently investigating thousands of claims made via its hotline by whistle-blowers.
Furlough fraud in corporates – where organisations have claimed furlough monies, whilst still having employees working in some shape or form – is a big focus for HMRC right now, though it will unlikely have the capacity to fully investigate every suspected instance. There is a possibility that some organisations have been doing this as a firmwide activity, but it’s also possible that there have been rogue departments within companies that have been wrongly claiming grants under the radar, which – if uncovered by a whistle-blower – can lead to the company coming under investigation for fraud, particularly if it is suspected by HMRC as a “high risk” case.
Although a number of companies will have been deliberately fraudulent in claiming under the Coronavirus Job Retention Scheme, the complexities of the rules and guidelines mean that many employers will have simply made mistakes throughout this period, including simple admin errors like miscalculating hourly pay or mistakes in relation to holiday periods. Nevertheless, businesses that have wrongly claimed – even if accidentally – must notify HMRC within a 90-day window of receiving the grant and ahead of the 20 October amnesty or else risk a penalty charge. If these businesses report to HMRC under the amnesty, they will have to repay their funds, however, businesses that have made genuine mistakes will not be penalised in the long run. In the hope that employers will confess to overpayments sooner rather than risk a full investigation further down the line, HMRC says it has made the process of repaying the wrongly claimed money ‘as easy as possible’[iv]. Those who have committed fraud wilfully on the other hand, face prosecution and penalties and have little defence.
The amnesty has been introduced so businesses that recognise they have done something wrong throughout the duration of the furlough scheme can come forward to declare their errors so as to avoid criminal investigation and being treated as fraudulent, even if they have made a mistake.
In addition, if a company is found guilty of furlough fraud this could give rise to a penalty of up to 100% if the error was deliberate and concealed. The business will also face reputational damage, therefore, it is important that companies carry out a self-audit and notify HMRC as soon as possible and before the 20 October amnesty. HMRC does recognise that the furlough scheme is a new and unfamiliar system where human error is bound to result in some cases of mistakenly claimed funds and that these instances do not mean companies have sought to defraud the government. As with any disclosure to HMRC, a full and early disclosure[v] of mistakenly claiming money from the furlough grant will influence the amount of penalty the regulatory body seeks in the investigation.
Companies now have only a few days to admit their mistake to HMRC and, although HR departments and company directors should carry out a full audit themselves to identify mistakes, seeking professional legal advice is recommended as soon as companies spot any irregularities. If a company suspects a significant mistake has been made following a self-audit, engaging with a legal team has the advantage of obtaining expert guidance in this complex area from legal experts who will not only be able to identify problems much faster, but they will suggest the best ways to navigate the issue whilst at the same time as ensuring communications are protected by legal privilege.
Company directors have a wide range of responsibilities under statute, regulation and the common law. With mistakes made regarding claiming furlough monies, directors should ensure that they understand the risks and implications by talking to a specialist quickly – it is crucial to involve lawyers and other professionals early to ensure that companies understand their duties and risk of liability. Otherwise, directors could even be at risk of being subject to criminal action and disqualification proceedings. Though companies that have made genuine mistakes will be faced with understanding when reporting to HMRC in light of the complexities of the scheme, legal representation is advised to ensure employers are aware of their rights and assist HMRC in their investigation, but without inadvertently making costly admissions and harming their own defence.
If your organisation is under investigation by a regulatory authority in connection with an alleged fraud, Walker Morris can advise you at every stage of the process. For information on how Walker Morris can advise your business, get in touch with the team – Gwendoline Davies, Andrew Northage and Gawain Moore:
E-money platform Contis partners with UK fintech startup Ordo on instant payments
Leading European payments provider, Contis, is excited to announce a new partnership with UK fintech startup Ordo.
Contis is powering the fintech revolution, helping businesses unleash their true potential with award-winning real-time payment solutions. Contis puts next generation accounts, cards and apps in the hands of their customers.
Ordo is also helping businesses and organisations unleash their potential with technology that makes getting paid easy. With smart, secure and automatic bank transfers, it’s one of the safest and fastest ways of managing finances between people. It also takes the hassle out of requesting and tracking business payments with immediate money transfer and automatic invoice reconciliation.
This partnership will soon make loading accounts quicker and simpler for Contis’ end-customers. With the potential to benefit over 800,000 accounts, it’ll also simplify loan repayments, fund transfers between contacts and even splitting bills between friends.
Contis is a Principal member of Visa, providing B2B issuing and processing through its wholly owned, cloud-based technology. Everyone’s needs are unique. That’s why Contis’ end-to-end platform and alternative payments technology enables every company to build their own bespoke solution. Partnering with Ordo brings additional choice and functionality for businesses and their customers.
Peter Cox, CEO and Founder at Contis, said: “We’re delighted to partner with Ordo to bring instant remittances and automatic reconciliation to businesses and account holders alike. At a time when finances are tight for many, the benefits of quick and secure digital money transfer are especially welcome.
This is the latest in a long run of Contis innovations and updates, recently including Buffer ‘secondary authorisation’ technology and international payments with Currencycloud. We pride ourselves on offering a frictionless experience to our clients and their customers. Integrating Ordo’s exciting tech has the potential to enhance payments capabilities for over 800,000 accounts and counting!”
Craig Tillotson, CEO at Ordo, said: “Our partnership with Contis means that even more businesses and their end customers can quickly start to benefit from Ordo’s revolutionary Open Banking enabled Request for Payment service, lowering costs, improving efficiency, and delivering simpler and safer payments for end customers. The shared desire of our two teams to use technology and service innovation to deliver real benefits to our clients and the complementary nature of our businesses made it an easy decision to partner with Contis and add Ordo into their end-to-end platform.”
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