Businesses worldwide now face an additional layer of complexity as a result of COVID-19. Our health, safety, and livelihoods have been put at risk as a result of businesses that have suddenly entered completely unexplored markets.
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The crisis is expected to impact every facet of the business, including the sourcing of goods, their purchase and sale locations, the locations of work, and the methods employed in their completion.
In addition, governments have temporarily loosened regulations to lessen the burden on businesses and have invested billions of dollars in their economies. Leading international business administration services provider TMF Group has identified 1,114 COVID-related individual government support programs that are accessible to businesses globally. This offers international companies a wide range of potential assistance, but handling and processing this volume is a challenging task.
There is evidence that many businesses will expand internationally in response to the COVID-19 crisis as the world economy starts to recover. More than a third (36%) of participants in a recent survey of American business executives stated that the experience had sped up their plans for global expansion. Businesses also encounter complexity when they relocate overseas. Multinational corporations must become adept at navigating a complicated web of laws, procedures, and customs because no two jurisdictions are the same.
TMF Group has released a report on business complexity to aid in navigating a varied and quickly changing global business environment. Based on the ease of doing business, 77 jurisdictions are ranked by the Global Business Complexity Index. Comprehensive interviews with TMF’s experts in each of the jurisdictions form part of the ranking. Three areas of business operations were the focus of the surveys: payroll and human resources; rules, regulations, and penalties; and accounting and tax.
The report identifies factors that businesses should take into account when assessing foreign investments or dividing resources among worldwide operations, even though it is unclear how COVID-19 will affect business regulations and international trade. Companies already had a difficult task ahead of them in order to conduct business safely within the ever-complex financial, regulatory, and employment regulations. This was even before the pandemic.
In order to succeed, businesses have to deal with both local and global pressures. Two common and quickly evolving trends are the emphasis on cross-border compliance and the acceleration of technological advancements. Furthermore, different jurisdictions have very specific procedures that may be expensive for multinational companies.
The jurisdiction that is the most complex is Indonesia. Although the 260 million-person population and wealth of natural resources of the nation draw in businesses, doing business there is fraught with difficulties. TMF Group discovered that the largest barriers are stringent laws that restrict foreign ownership and safeguard workers. On the other hand, the government is liberalizing the economy through deregulation and tax breaks for investments made in special economic zones.
Five of the ten most complex countries are in South America: Brazil, Argentina, Bolivia, Colombia, and Ecuador. These countries face comparable difficulties. Brazil boasts numerous tax regimes spanning across federal, state, and local levels of government; additionally, local and international businesses are subject to distinct regulations; and employment laws significantly prioritize the rights of employees over those of employers.
The United States, the second-least complicated business environment for multinationals, is at the other end of the spectrum. A few essential components of the business-friendly climate in the United States were emphasized by TMF Group:
Its policies are open to the public, well-defined, and subject to abrupt modifications or rigorous audits. The American economy functions primarily under the presumption that businesses are adhering to regulations.
Only publicly traded companies are legally required to conduct financial statement audits; in contrast, multinational corporations operating in China and many other large economies still face significant administrative burdens in ensuring compliance.
It makes hiring and firing staff easier and streamlines accounting and tax administration.
Financial hubs located offshore, like Curacao, the Cayman Islands, and the British Virgin Islands, experienced positive results. However, as a result of public pressure to enact stronger laws and regulations pertaining to beneficial ownership, tax transparency, and money laundering, they are becoming more difficult for businesses to comply with.
TMF Group discovered that increased technology deployment, a worldwide perspective, and the alignment of international laws and regulations have all contributed to a greater sense of synergy in international business. The combination of these factors has reduced the complexity of jurisdictions for multinational corporations.
The report also emphasizes that countries need to strike the correct balance between three major, general trends in order to draw in foreign investment and foster business-friendly environments:
Localism vs. Internationalism
Significant business opportunities arise from extending operations into new global regions. Governments are keeping their doors open to foreign trade by streamlining the procedures for integrating them into their domestic economies and occasionally by providing incentives. Jurisdictions, however, differ in how well they are able to foster an atmosphere that is more welcoming to foreign direct investment.
Tradition vs Modernization
While tradition is reflected in localized obstacles to efficient operation, modernization is, broadly speaking, about showcasing a commitment to international standards and practices. Certain governments cling to a great deal of customs, whether they be formal laws or just accepted norms.
Technology versus Simplicity
A new jurisdiction must implement new technology in order to attract global business. However, as jurisdictions attempt to close the gap between paper and online solutions and struggle to adapt to new digitalized systems, this may result in an initial spike in complexity.
