The need for Indian companies to get a firmer grip on their international operations was thrown into the spotlight after a TMF Group survey revealed only half are confident that all their global entities are compliant or adding value.
TMF Group, a leading provider of business administration services, polled over 1,700 senior decision makers with entity management responsibilities across seven countries –India, the UK, USA, Brazil, China, Singapore and France – to get a better understanding of some of the complexities facing multinational companies.
It revealed less than a fifth (19%) of Indian companies evaluate their global entities on an annual basis to check they are all adding value and operationally efficient. Those with their headquarters based in Brazil and China have the best track record, but only marginally, with 28% saying they carry out checks across their organisation each year.
On average, 20% of Indian companies carry out evaluations every 2-3 years (compared with a global average of 18%), 14% every 5 years (14% globally) and a worrying 9% said they believe they have never done a global entities audit (8% globally). Companies in the US and Singapore have the worst record in that regard, with 12% in each saying they have never carried out an audit.
Perhaps unsurprisingly given the irregular approach taken by so many, only half of Indian participants that took part in the survey (50%) said they were either ‘very’ or ‘reasonably’ confident of being fully compliant with local laws and regulations across all entities, leaving many at risk of potential fines and reputational damage. Chinese multinationals were the most confident at 55% – compared with 48% globally.
Of the 263 Indian companies that took part in the research, 61% said they have more than 20 legal entities across different countries and jurisdictions, with 14% saying they have more than 100 (compared with 51% and 8% globally, respectively).
“International expansion can bring lucrative rewards for Indian businesses with opportunities in market growth and diversification,” said Shagun Kumar, Managing Director for South East Asia, including India, at TMF Group. “But keeping on top of all your entities, particularly in an increasingly complex global market where legislation changes frequently, plays an important part in delivering on that success.”
“The risks of failing to comply with international regulations are growing as new rules are introduced and governments step up enforcement in the face of public scrutiny. This research should serve as an important wake-up call and an opportunity for multinationals who haven’t yet invested in creating control and governance of their global entity management.”