Author: Lav Goyal
MNC's should customise the governance framework to suit Indian situation and have appropiate internal control design review mechanism . Most Multinational Companies are able to manage their businesses very well at home, but often struggle in other countries. While their business processes are well run in their home country, they find that the same processes perform unsatisfactorily or at least sub-optimally in their overseas entities.
This is mostly a result of replicating the business models, organisational structure, processes and practices in different countries without full appreciation of the fact that businesses have to be organised and their risks managed differently, in foreign land. There are various underlying factors why governance of business has to be customised to local situations.
MNCs entering different countries need to understand such local factors and identify an appropriate response to them, when designing, setting up and running businesses.
Here are some of the top reasons for why and how MNCs face some typical business risks in India. Market behaviour:Customers, vendors and channel partners behave differently in different parts of the world, and India is no exception. The local behavioural pattern, commercial practices, expectations, traditions, culture and ethical standards in India market are much different than in the western world, West Asia or East Asia.
This throws up the risk that a foreign company’s business rules, policies and processes that may have been working successfully elsewhere may be quite misaligned to the local needs in India. In many cases, even the business model needs adjustments to meet local market requirements.
Besides, there is a higher risk of inadequate screening of business associates in a foreign land. Local regulatory: In India’s case, the regulatory is generally said to be complicated. Besides, environment is perceived to be...