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Look Before You Leap 2011

Look Before You Leap 2011

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Published by: corruptioncurrents on Feb 04, 2011
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Look beore you leapManaging risk in globalinvestments
About the surveyDeloitte contracted Forbes Insights to conduct a survey to gain greater insight into the issues o compliance and integrity risks that are increasing as a result o growth opportunitiesabroad. The survey was conducted online rom May 11, 2010 to June 8, 2010, and was completed by more than 500 respondents rom companies in the United States, Canada, andMexico.About Forbes InsightsForbes Insights (www.orbes.com/orbesinsights) is the strategic research practice o Forbes Media, publisher o Forbes magazine and Forbes.com. Taking advantage o a proprietarydatabase o senior-level executives in the Forbes community, Forbes Insights' research covers a wide range o vital business issues, including: nancial benchmarking; talent management;marketing; risk and regulation; small/midsize business; and more.
Look beore you leap
Managing risk in global investments
As North American companies continue to explore growthopportunities abroad, most notably in emerging markets,we are observing that compliance and integrity risksappear to be rising sharply, a perception supported by oursurvey. Whether this oreign activity involves acquisitions,investments, or other business relationships, such as joint ventures, its deployment in regions oten previouslyunknown has raised the stakes or corporate strategistsand compliance ocers.While most executives are amiliar with the categories ocompliance risk — integrity and reputation, corruption,violation o economic and trade sanctions, and moneylaundering — expansion into the less developed regions oAsia, Central/Eastern Europe, and others is heightening thepotential or those risks to become reality. More than ever,“look beore you leap” should be at the top o the agendaor corporate acquirers.To gain greater insight into this issue o growing concern,Deloitte and Forbes Insights conducted the 4th annual
Look Before You Leap
survey. Participants included morethan 500 business proessionals at companies in the UnitedStates, Canada, and Mexico with a ocus on surveyingcompanies in the nancial services industry. Participantsrepresented a wide range o industries, with 39% o therespondents in the nancial services industry, includingboth nancial buyers, such as private equity rms andhedge unds, and strategic buyers.In addition, several one-on-one interviews were carried outwith senior executives responsible or corporate planningor compliance in order to explore particular concerns ingreater detail.
Executive summary
As used in this document, “Deloitte” means Deloitte Financial Advisory Services LLP, a subsidiary o Deloitte LLP. Please see www.deloitte.com/us/ about or a detailed description o the legal structure o Deloitte LLP and its subsidiaries.
Some o the key research ndings include:Almost two-thirds (63%) o total survey respondents
identied Foreign Corrupt Practices Act (FCPA) andanti-corruption issues that led to an aborted deal ora renegotiation over the past three years. Lack otransparency or unusual payment structures in contractswas cited by one in ve and 18% pointed to the useo agents, consultants, distributors, or third parties toobtain or acilitate business.The level o concern over the potential or compliance
and integrity-related risks has increased substantiallyover this period, especially in the areas o integrity andreputation. Eighty-ve percent o respondents said theirconcerns had risen signicantly or somewhat.A clear majority (60%) o respondents said that they
have either pulled out o a transaction or adjusted dealpricing to refect compliance and integrity-related issues.A similar proportion required a target or partner toresolve and/or disclose a compliance issue to regulatorsprior to closing.China is highest on the list o countries or regions
ranked according to concerns about the potential orcompliance and integrity-related issues when doingbusiness. More than 80% o respondents said theywere signicantly or somewhat concerned about China.Mexico and Central and South America ranked secondand Southeast Asia (Vietnam, Indonesia, and thePhilippines) was third.Entities rom Mexico appear to be very nely attuned
to compliance and integrity due diligence issues, andhighly condent in their ability to meet the challenges.More than 90% o respondents rom Mexico said theyidentied issues in the diligence process in each o theour risk areas mentioned above.

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