venturing abroad
Effect of Possible security threats for businesses venturing in the Middle East and Africa
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Effect of Possible security threats for businesses venturing in the Middle East and Africa
Globalization and technological advancement for example internet use have enabled many companies to expand their businesses oversees in a bid to diversify their market. The role of globalization in expansion of businesses overseas is improving access to human resource, funding and raw materials as well as prompt innovation, overall company growth and, profitability (Financial Regulatory Forum, 2011). Venturing oversees has become an indispensable plan in most company’s long-term and short term objectives. However, the projects are costly due to establishment of amenities abroad, recruiting more workforces, traveling of employees, specialized transportation networks as well as installation of information and communication technology systems. Moreover, it is a worthy investment as it enhances faster growth, access to cheaper materials, better quality and work efficiency, new market breakthrough and diversification (Riley, 2010).
The American corporate sector is filled with free spirited adventurous entrepreneurs. Based on a 2009 research on 250 senior executives, thirty eight percent of the participants ascertained that they attain 50% of company revenue from overseas operations (Growing your business internationally, 2011). There are many reasons why companies, both big and small want to expand internationally. Some of these include, market diversification that boosts general growth and increase revenue. However, venturing oversees must be a properly planned operation. The financial aspect of the operation should be critically analyzed. It is advised that the setting for a business oversees be done at a time when the company has sufficient money to fund the move. Market research is inevitable in implementation of such projects.
There are three key phases of a project to expand overseas namely planning, choosing locations and actual business operation. During layout of a plan to venture abroad, a company must consider basic elements like the nature of corporate environment of the targeted area. This can be done through market research. It is important that before venturing, a company is conversant with the regulatory and legal laws of a land Institute of Chartered Accountants in Australia (2010). Assessment of the political and social climate, tax and migration laws, regulations, innovation and incentives, legal system, resource availability, infrastructure and workforce is critical. A strategic plan is one that identifies the ideal target region as a secure one Institute of Chartered Accountants in Australia (2010). Security is paramount because it will determine the efficiency and effectiveness of business operations. Operations will run smoothly where the environment is peaceful.
Security has become a prime aspect especially for businesses looking to expand their businesses into Africa and the Middle East. The peace of a business environment is greatly attributed to the political stability of a region. Civil unrest is common in the Saharan Syria, Yemen, Lebanon nations (Emerson, 1995). Political instability presents uncertainties over the continuation of government policies critical to the existence and profitability of a business in a country (Luo, 1999)
In 2011, Noble Energy Company interested in discovering gas fields in the Eastern Mediterranean, disclosed that the unrests are a threat to the company’s earnings. There is always a possibility that civil unrest might erupt to wars and anti-west régimes, potential security risk in such countries includes evacuation of personnel, property theft, business interruption, and regulation of entry and exit of personnel and supplies to the country, reduced market demand, changing fiscal regimes, volatility in product prices and supply and difficulty acquiring capital (Financial Regulatory Forum, 2011). There is also the risk of deprivation of contract rights like those under United States Foreign Corrupt Practices Act (Financial Regulatory Forum, 2011)
Another potential security threat is terrorism (Duignan, et. al, 1981). For years now, Islamic fundamentalism is a religious war essentially in the Middle East but has today spread to Pakistan, Afghanistan, Sudan and Nigeria, as well as into the U.S., Europe and large parts of the former Soviet Union (Emerson, 1995). Religious movements such as CARI are formed to prove that Islam is the true religion even by means of force (Emerson, 1995). Radical Islamic fundamentalism is also a political movement to perpetuate political shrewdness. Islamic fundamentalism demands re-creation of the Muslim Empire ‘Khalifa’. In addition, they support absolute rejection of Western systems and values such. In fact, Islamic fundamentalists have always believed in a western conspiracy to overpower them through capitalism, Marxism and democracy (Emerson, 1995). These movements want to make shaari’ah laws compulsory. Stunt action is taken against individuals or companies considered foreign or ignore the movement. For example, Hamas leaders, Jew haters and spearheads to the creation of a Muslim only state, beheads, strangles, pour acid, burn, cut off limbs and gouging out of eyes of victims (Emerson, 1995). Radical fundamentalists are also perpetuated through social deprivation and economic deterioration. What better way to manipulate the economy and spread warnings to non followers than to attack foreign businesses. Fact is, in areas like the Middle East, security of a company and its workforce especially if non Muslim and foreign poses a high potential security threat.
Africa is not left out in the menace either due to the existence of a non black population especially of Arabs (Emerson, 1995). Sudan is known to side with the Middle East by providing training ground and planning bays for Islamic fundamentalist movement. Algeria is also in collaboration with the Middle East western rebel groups. These religious wrangles have curbed peace in these regions posing as a threat to countries planning to venture there (Duignan, et. al, 1981).
Foreign regulations and standards call for restructuring of the production process, inputs and packaging and transportation incurring additional costs. A potential security threat not only affects a company’s workforce but also the ease and efficiency to import goods into the target nation. Some civic and opposition regimes are politicized granting them the ability to manipulate the economic sector. Manipulation is done through raising import taxes or controlling what enters and leaves the region (Luo, 1999). Shipping is affected in areas where the waters are invaded by pirates or rebel groups. Barriers to product importation will reduce the ability of a company to supply sufficient products to the target nation lowering sales and consequently oversee revenue. High import taxes will increase the expenses of operation lowering the gross profit margins. Product theft is also likely during shipping.
Business continuity is the foundation of the overall growth of a company. The possibility of terrorist attacks and wars in Africa and Middle East interrupts normal business operations. These interruptions and inconveniences lower staff productivity by disrupting work flow and affect daily business operations. Time management will be affected and deadlines will not be reached on time. This can result in failure of a company to achieve its goals in the stipulated time. When the risk of insecurity cripples the operations of a business completely, overseas branches may be forced to close down for good or until peace and security is restored. These measures are however, a greater loss to companies considering the funds used in investment.
As a director of security in a firm, it is one’s duty to protect the organization’s workforce and the company itself. Venturing a business in areas with religious rebel movements, terrorism and civil wars will endanger the staff in various ways. Foremost, the employees may be at risk of attack to and fro working areas especially by rebel movement members. The productivity of the workforce will also reduce due to fear of the unknown. During planning, one should insist on a location that is peaceful and free from wars where the human resource of a company may fall victim. Security in the workplace can be enhanced by the installation of Alarm and alarm Monitoring systems, security guards and patrol services (Financial Regulatory Forum, 2011). Perpetuators may target public forums calling for the need to ensure special event security. As much as diversity in recruitment and selection process is advised, pre-employment screening is vital in eliminating employees whose motive are fraudulent, information theft or selling company secrets to potential threat groups.
Special security should be awarded to the easy targeted company executives. Generally, Crisis Management and Response as well as security assessment services like risk assessments and evaluation, general security surveys and compliance audits are inevitable considerations during planning to expand a business in insecure regions (Financial Regulatory Forum, 2011). Security allowance is also required in such areas increasing the expense of operation. Fear among employees may make some turn to drugs for relieve which in turn increase workplace violence. In a bid to know the stand of a company, the group may hack into the information and internet demanding for the upgrade of network and computer systems. Due to many security measures required when investing in the Middle East and Africa, the investment funds are bound to increase tremendously. As much as it is a good business opportunity, expansion into these two regions bears a very high security risk. This security risk increases uncertainties in the growth of a business in the target nation posing an even greater overall risk.
In conclusion, the greatest security threats for companies planning to expand their operations to Africa and the Middle East is possibility of religious and civil wars as well as terrorism. These threats can be enhanced or may result to economic deprivation. The risk of venturing in war zone areas places the company and its workforce at stake. Transportation of goods into their destination faces potential product theft and high import taxes. Business operations are susceptible to interruptions that hinder business continuity and further expansion. It is therefore necessary for companies venturing in insecure regions to decide whether taking the security risk is worth it or not.
Reference
Duignan, P., Gann, L. H. & Hoover Institution on War, Revolution, and Peace. (1981). The Middle East and North Africa: The Challenge to Western Security. Stanford: Hoover Press.
Financial Regulatory Forum. (2011). Protests in Middle East, North Africa spur look at corporate risk disclosures globally -Westlaw Business. Retrieved on January 11, 2012 from http://blogs.reuters.com/financial-regulatory-forum/2011/02/18/middle-east-protests-spur-new-look-at-corporate-risk-disclosures-globally-westlaw-business-disclosures-risky-business/.
Foreign expansion growing your business internationally. (2011). Retrieved January 11, 2012 from http://www.deloitte.com/assets/DcomIreland/Local%20Assets/Documents/Tax/IE_Tax_Foreign_expansion_0311_web.pdf.
Luo, Y. (1999). Entry and Cooperative Strategies in International Business Expansion. Connecticut: Greenwood Publishing Group.
Institute of Chartered Accountants in Australia (2010). 20 issues for businesses expanding internationally. Retrieved January 11, 2012 from, http://www.slideshare.net/CharteredAccountants/thoughtleadershippaper-businessesexpandinginternationally.
Riley, J. (2010). Q&A – Evaluate the benefits and drawbacks of international expansion options. Retrieved January 11, 2013, from http://www.tutor2u.net/blog/index.php/business-studies/comments/qa-evaluate-the-benefits-and-drawbacks-of-international-expansion-options.
