Governing across overseas locations carries risk, so the right international mindset is critical. Hear advice on cross-border governance at the 2019 Australian Governance Summit from Frank Cooper AO FAICD, non-executive director of South32 Limited and Woodside Petroleum Limited, Division Council president of AICD WA and Chairman of the Insurance Commission of WA. He will take part in a panel discussion: ‘Governance across jurisdictions: Navigating the challenges of operating across borders’.
What are some major difficulties in managing overseas operations?
One of the first that comes to mind is the difficulty of operating in a different cultural and political environment. It is important to be aware of cultural differences and any political risk existing in the country, in terms of the fiscal regime, certainty of tenure, things like that.
Another that stands out is making sure you have the right people with the right experience working in these jurisdictions. Operating in a different country is not like having another office just down the road. Understanding the cultural differences and having the ability to work in that context while also meeting your corporate obligations takes experience. Having people with the knowledge of operating internationally – including regulatory requirements – is critical.
Then, there’s simply the question of distance and the impact it has internally. People who are out of sight can be out of mind even within your own company. Breaching that distance to keep people engaged, and making sure that the corporate culture is intact across boundaries and continents is easier said than done.
Can you give us an example of a cultural difference across borders that can pose a problem?
There is the possibility of increased exposure to bribery and corruption. I think it’s important to have a single way of doing business and a single high standard that is applied consistently across your operations. That includes how you treat people in the various jurisdictions in which you operate.
Choosing not to engage in some of the practices that may be common in certain countries can make it more inconvenient, but I believe it ultimately makes more sense to stick to your standards and your values. Otherwise, it will inevitably unravel on you.
One of the challenges is how bribery and corruption can arise. Often it can be inadvertent. You might be dealing with someone who you think is a bona fide third party, but it turns out that they have some relationships you’re unaware of. They might in turn indulge in some inappropriate behaviour that you can get swept up in because they were acting on your behalf. It can be quite a complex situation. Hence the importance of clear rules and zero tolerance.
How can mining and resources organisations develop trust within local communities?
In my opinion, I think the answer to this lies in the underlying philosophy of your organisation. If you take the view that the resources belong to the country and the people, and that you have been given the opportunity to extract those resources, that gives you a starting point for the nature of that relationship. It flows through to paying your appropriate royalties and fees and taxes and so on, but there is often a broader expectation that the benefits will be shared with local communities. This begs the question: how do you best go about sharing that value? There’s not a simple answer. But, in my experience, it seems to work better where companies involve local communities in trying to determine how best to share that value. In the past there may have been an attitude that if you just hand over enough money then that is enough, but I think local communities are now looking for more investment into their sustainability as a community.
One challenge to doing this well is the increasing expectations of communities. In a world where there’s less leadership from government, communities are often expecting companies to contribute and provide that leadership. Striking the balance between doing what you can within the bounds of what you can reasonably contribute is becoming increasingly difficult. It has to work for both parties. Unless it’s economic and providing a reasonable return to the company, you won’t be able to provide support to that community in the long term. That’s why I think the quality, the openness of your engagement – and then effectively communicating your successes, too – is vital.
What must the board get right to succeed in overseas ventures?
For the board, it’s essential to have clarity of purpose, and not only of the business side of things. It is important to understand that once you start to do business in another country, you are part of that country and that community. That brings with it some obligations and responsibilities. You need a clear view on how you factor those into doing business in that country in a way that ultimately works for both.
You must have processes in place to manage each of the risks posed by operating overseas that I’ve mentioned. Clear policies, effective training and support, and a system for ensuring you have people on board with the right experience is a good starting point.
Having a corporate culture that embraces the challenges of operating internationally is critical. Having a business-wide understanding of your responsibilities to the communities you work with and embracing them as part of how you do business is equally important.
Interestingly I think there is a lot we can learn about being better corporate citizens as a result of the experience of operating internationally.
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