9 Risk Management Solutions for Multinational Corporations

Risk management is an essential part of business for any large organization. But for those that operate internationally, its importance increases significantly.

Companies that operate solely in one territory only have one set of rules and regulations to contend with, and in the main, only have to worry about one currency and working in one language. But these factors are all multiplied for international businesses, and without integration, it can be easy to fall foul of differences between countries, whether they be political, financial or regulatory.

This blog sets out the nine key challenges that multinational organizations must navigate to minimize risk – and how they can be solved through changes in strategy, or through integrated services for areas like payroll or HR.

1: Understand and prioritize risks

Prioritizing risks means far more than simply writing them all down on a list, and then deciding which ones sound like they’re the most important. It requires an in-depth analysis of each individual risk in turn, and exactly what the consequences could be. Only with this detailed information can risks fully be understood, and then managed in a way that keeps the business protected, but doesn’t impact on the smooth day-to-day running of the company.


2: Assess the political environment

Some countries are more politically stable than others, but in every country, there is always a risk of political upheaval. This can come from a variety of sources: terrorism, war, nationalization, asset seizure, diplomatic sanctions, trade tariffs, and even failures by local authorities to enforce business contracts. All of these can make even the most routine of business activities far more difficult and much more expensive. It’s therefore vital to conduct extensive due diligence and thoroughly research a country’s political situation before expanding into it.

3: Know the financial risk of different currencies

Foreign exchange rates fluctuate on a daily basis, and these movements can have a significant impact on a multinational company’s finances. This especially applies to developing countries, where currencies can be more volatile. It therefore makes sense to partner with banks and other finance-related providers who have a presence in all relevant territories, and that have extensive local knowledge of how those countries operate from a business perspective. This can ease any currency conversions needed and reduce the effects of any unforeseen issues.

4: Stay aware of regulatory risks

Business-specific regulations can vary enormously from country to country. These can be administrative, such as filing documents or applying for permits; financial, such as the payment of tax and social security contributions; and increasingly environmental, where businesses must demonstrate a strong commitment to sustainability. Local knowledge is vital to navigating a path through the regulatory minefield, whether that be from locally-based accountants, lawyers, or a mixture of the two.

5: Adhere to global compliance laws and regulations

On top of the local regulations mentioned above, there are also an increasing number of regulations that apply regionally or globally. For example, similar legislation to the European Union’s General Data Protection Regulation (GDPR) applies in many other countries, and these can have a major impact on how employee data is used and processed by payroll and HR departments. An integrated approach, where one partner can provide expertise and services across territories, is therefore vital.


6: Diversify your supply chain

The old saying that you shouldn’t put all your eggs in one basket is just as relevant to the business world as ever. Organizations that source all of one particular product or material from one supplier, or even from several suppliers all within one country, are at risk of major disruption from geopolitical issues, trade sanctions or disruption caused by natural disasters. As part of good risk management practice, organizations should regularly review their supply chains and explore ways to diversify them across multiple territories wherever possible.

7: Invest in integrated services

In a business world that is increasingly driven by data, inconsistencies in data between countries can be hugely inefficient, create compliance issues, and add to the administrative burden of payroll and HR teams. Integrated, global solutions – especially those based in the cloud – can be hugely beneficial in these areas, not only in smoothing out any variations between countries, but also in opening up the potential to use this harmonized data to drive greater insights around the business as a whole.

8: Maintain robust cybersecurity

The security of data and applications is an ongoing risk to business, and is increasing all the time for a range of reasons: greater data volumes, a broader threat landscape, and more employees working remotely and from their own personal devices. It’s therefore vital to maintain a constant state of vigilance in order to minimize any business risk posed by cybersecurity, and to continually consult partners and vendors to understand the steps they are taking to keep everything secure.

9: Appoint a risk management team

Most of the above points are continuous jobs that require attention on an ongoing basis, rather than being one-off ‘tasks’ that can be forgotten about once they have been completed. Because of this, all good businesses should retain a similarly permanent focus on risk management, with sponsorship at the Board level and consider the creation of a specialist team who help business owners to manage risks across the organization. The specialist team, through monitoring risk management measures and formulating contingency plans, will prove enormously valuable for a global business over time, especially as it can enable quick responses to emerging challenges and regulations.

In summary

From running payroll in South America to sourcing raw materials in Asia, every part of modern international business has an element of risk that needs to be protected against as much as possible. As such, risk management should be deeply embedded within an organization, and should also play a role in deciding which partners and vendors the business should team up with. It’s clear that global solutions in areas like payroll can deliver huge benefits for employers and employees alike, but it’s important that the provider can also demonstrate a strong and lasting commitment to risk management, too.

CloudPay’s global payroll solution is designed to meet the needs of modern business, across payments, data and risk management. Take a closer look at our technology and how it can support your international organization here.

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