Myth and reality of compliance and investment climate in Russia
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Perception and reality of corruption in Russia Effects for multinational companies investing in Russia
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Expansion in Russia and the CIS is an important part of the implementation of the growth strategy of many international companies. However, Russia has a rather negative reputation in respect of bureaucracy, corruption, transparency, favoritism, rule of law and other elements, which are critical for compliance with generally accepted Business Principles on doing business for international companies, including Foreign Corrupt Practices Act (FCPA), anti-money laundering practices, and OECD regulations. In this presentation, we will investigate the current state of investment climate and transparency in Russia. We will make conclusions and recommendations for international companies who are considering investments or expanding their current investments in Russia.
Transcript of Myth and reality of compliance and investment climate in Russia
Perception and reality of corruption in Russia
Effects for multinational companies investing in Russia
PERCEPTION AND REALITY
MYTH
RISK OF DOING BUSINESS IS HIGHER COMPARED TO OTHER EMERGING AND NON-EMERGING MARKETS
REALITYFINANCIAL MARKET RISKS PLACE RUSSIA IN TOP 25% LEAST
RISKY COUNTRIES
INVESTMENT CLIMATE 1
PERCEPTION AND REALITY
MYTH FOREIGN COMPANIES CANNOT DO BUSINESS IN RUSSIA
WITHOUT EXPOSURE TO COMPLIANCE ISSUES
REALITYINVESTORS ARE SATISFIED IN DOING BUSINESS IN RUSSIA
AND WILL CONTINUE TO INVEST
INVESTMENT CLIMATE 2
PERCEPTION AND REALITY
MYTH DEALING WITH GOVERNMENT IS NO-GO ZONE
REALITY
WORKING WITH GOVERNMENT IN HYBRID STATE STRUCTURES IS PROVIDING FOREIGN INVESTORS COMPETITIVE ADVANTAGE ABOVE LOCAL PLAYERS
INVESTMENT CLIMATE 3
PERCEPTION AND REALITY
MYTH
TONE AT THE TOP CANNOT BE CHANGED
REALITY
HIGH POWER DISTANCE MEANS THAT COMPANIES COMPLY WELL
INVESTMENT CLIMATE 4
EMERGING MARKETS MEANS HIGHER RISKS…
• INVESTMENTS IN RUSSIA GENERATE HIGHER PROFITS THAN IN OTHER (HIGH RISK) MARKETS
• HIGHER RISKS EXPOSES ITSELF BY HIGHER COMPLIANCE ISSUES IN RUSSIA
• BUT CAN BE OFSET WITH THESE HIGHER PROFITS
COMPANIES INVESTING IN RUSSIA NEED TO INVEST MORE IN COMPLIANCE, RISK MANAGEMENT, TRAINING
FACT # 1
INVESTORS DO NOT LEAVE BECAUSE OF COMPLIANCE ISSUES
• THERE ARE NO FOREIGN INVESTORS WHO HAVE LEFT RUSSIA BECAUSE OF COMPLIANCE ISSUES
• 12 OUT OF 18 DJ SUSTAINABILITY INDEX SUPER SECTOR LEADERS ARE ACTIVE IN RUSSIA, INCLUDING– AKZO NOBEL (CHEMICALS)– UNILEVER (FOOD AND BEVERAGE)– PHILIPS (PERSONAL AND HOUSEHOLD GOODS)– AIR FRANCE/KLM (TRAVEL AND LEISURE)
INVESTORS IN RUSSIA ARE SATISFIED AND WILL CONTINUE TO INVEST IN RUSSIA
FACT #2
THE INVESTMENT CLIMATE IS CONTINEOUSLY IMPROVING
• SYNCHRONE WITH LONG TERM VIEWS OF INVESTORS• GOVERNMENT OF RUSSIA IS VERY WELL AWARE OF
CURRENT SHORTCOMING AND HAVE MITIGATION PLANS FOR 202-
• HYBRID STATE SYSTEMS TO OVERCOME SHORT TERM ISSUES WITH COMPLIANCE
INVESTORS IN RUSSIA CAN BENEFIT FROM PREFERED SITUATION WHICH LOCAL COMPANIES DOES NOT HAVE
FACT #3
BEST PRACTISE WORKS
• FOCUS ON ATTITUDE, BEHAVIOR AND TRAINING• TONE AT THE TOP IS PARAMOUNT• INCLUDE OTHER STAKEHOLDERS AND PARTNERS/AGENTS
MANAGE YOUR PROCEDURES, AND COACH YOUR PEOPLE
FACT #4
REINFORCEMENT
• Repeat strategic priorities on compliance using internal procedures and policies;
• Ensure that people processes are aligned with the compliance priorities, including:– Hiring and firing;– Performance management;– Decision making.
WHAT’S NEXT?
DISCUSSION AND CONTACT
• [email protected]• TWITTER: @GERARDMOSCOW• LINKEDIN• BLOG.UIJTENDAAL.COM
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