Leveling the field: how the rule of law and a free press are crucial in international business
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xpanding a business into new international markets can be a complex challenge as companies grapple with differing regulations, wildly varying cultural norms, and must o en communicate and market in mulple languages. S ll, the rewards are legion – a much larger consumer popula on, exposure to new and innovave products and a diversifica on of overall risk as a firm moves away from a single market. The world is a large, dynamic place and massive growth (especially in the global middle class) is expected in Asia, the Middle East and Africa in the next decade. What businesses quickly discover, however, is that much of what companies take for granted in the U.S. or UK as far as legal protections and transparency are weakened or en rely absent in the countries into which they might want to bring their business. How do companies determine where they can safely manufacture their products or source their goods? What tools are available to help judge this risk? Every year, a plethora of global rankings are published by various organiza ons to help explain the rela ve risks and ease of inves ng in a given country. An alphabet soup of organiza ons from the OECD to WIPO as well as bodies such as the World Bank and companies like A.T. Kearney compile lists to rack and stack the various na onal markets. But there are other indices that are crucial to interna onal business leaders and are usually overlooked as quants focus on comparing easily-iden fiable sta scs such as consumer spending habits or labor costs. The overlooked
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concerns of the rule of law w and press freedom, however, determine the true cost and risk of an interna onal investment, and a close examina on of these will help companies to steer clear of serious pi alls before commi ng me, energy and personnel to a new market.
The importance of a free press to business In the last few years, the concept of a ‘free press’ has had a rough ride, especially in the United States, as poli cal fac ons point fingers at what they see as par san repor ng, and other (unprofessional, unchecked) social media-based organiza on have started to dominate how many people get their news. However, professional inves ga ve journalism is a crucial, irreplaceable ally to business investors. A free professional press is one of the most important tools to ensure transparency in a market. A great example of this is the exposure of Wirecard in Germany (and the Philippines) by intrepid Financial Times reporters. Despite both the firm’s auditor (EY) and the German government’s own watchdog failing to detect any problems, the FT reporters con nued to dig into an apparent disconnect in Wirecard’s accounts and eventually exposed a billion dollar fraud which led to the firm’s collapse. In the absence of a free press, this fraud would not have been discovered. When you are working with foreign partners, the free press is a strong and cri cal ally on checking any sort of flagrant fraud and company shenanigans.
This important role in the press - monitoring governments and businesses for misconduct - is why the Reporters Without Borders (RSF) ‘World Press Freedom Index’ is a key component in assessing a foreign market and understanding what checks and balances poten al future business partners from these countries may face. The U.S. is ranked 45th and the UK 35th out of 180 countries, neither of which are par cularly impressive, but at least give a baseline from which to start a compara ve survey. Interested in doing business in Russia? Their ranking is 149th out of 180. China? 177th out of 180. Companies must think twice before engaging in business here, as a firm enters these countries without the helpful assistance of a free, inquisi ve press to help iden fy and bring down fraud, bad prac ces, gra and other major concerns for businesses opera ng in the country. This is especially crucial for foreign businesses who are
