In today’s increasingly global economy, the potential benefits—and risks—of cross-border business could not be greater. Rapidly improving technologies and new opportunities in emerging markets, have contributed to nearly US$1 billion in foreign direct investment and the establishment of more than 60,000 multinational companies (a 100 percent increase since 1990). However, as corporations, officers and directors strive to keep up with the fast pace of international business, they are increasingly at risk for civil and criminal enforcement actions. Governments around the world are stepping up actions against companies: The new UK Bribery Bill is an example of this newly energized interest in corruption.
Risks associated with such proceedings include not merely the cost of investigations and civil or criminal penalties, but also a variety of threats to corporate reputation and management careers. To mitigate these risks, companies are under enormous pressure to reduce expenditures for compliance and risk management needs.
Increased risk and spending pressure are two of the three factors necessary to present a risk management “perfect storm.” The third factor is sometimes unknown and always unpredictable: the underlying seeds of a significant exposure to liability and resulting loss of revenue, damage to reputation or other corporate maladies that have already been sown and that will become apparent at some inopportune moment.