While the term “globalization” may seem past-tense in today’s hyper-connected world of information, trade, and capital, only in recent years have the challenges for managing risk and sustaining business growth on a global scale come into full view, making “globalization” of the public affairs function a critical business imperative.
Many companies across a diverse array of sectors from IT and healthcare to manufacturing and FMCG are increasingly seeing more than half of their annual revenue coming from markets overseas. For some, such Coca-Cola and Intel, foreign markets can account for 70-80% of their total global revenue. Driven by macro demographic and economic trends, this percentage will only continue to grow, as will the number of companies that rely on international growth for their future.
At the same time, many companies in this number often lack the international strategic government and public affairs capacity to secure and protect this growth in their key markets of operations – and globally overall – leaving them vulnerable to unexpected policy actions, reputational crises, and other threats that can significantly impact their economic value.
These risks will only continue to increase. In a survey conducted by Interel of CEOs of international government relations firms across 25 markets, 92% said that the amount of regulation affecting business in their respective markets has increased in the last five years, while 60% noted that businesses are “very concerned” about increasing political risk and its economic impact. Moreover, the global consultancy McKinsey & Company estimates that the “business value at stake” today from government and regulatory action is about 30% of earnings, and even more for companies in the financial sector. Add to that the recent global financial crisis, geopolitical instability, and rising expectations of businesses by the public, and the world has become a much more complex – and in some ways fragile – place to do business.
And therein lies the global gap, where an organization’s international growth can often outstrip its own capacity to manage it in today’s fast-changing global environment, especially in policy-related areas. This dynamic is particularly acute in fast-growing developing markets where market complexities and “institutional voids” require a much more proactive approach of businesses to protect their license to operate and anticipate threats. Not minding this gap is a sure way for global businesses to stumble on unforeseen threats or to miss opportunities; however, for many international companies, minding the gap by “globalizing” the public affairs function can be a competitive advantage that can keep the C-suite – as well as shareholders – happy.
While every company has its own public affairs needs and culture, there are common considerations to help mind the gap and manage global policy and reputational risks strategically and proactively. It’s useful to start with these five below:
1) Start with the value proposition: the extent of public affairs needs and activity varies depending on the sector and company, but the function’s goals must clearly flow from a company’s business goals – domestically and globally. If seeking to build out the function, it’s imperative to first understand how the function is perceived within the company. Are you starting from the same page with your internal stakeholders – business unit heads, country directors, etc.? Is the function an established partner to the business, or a crisis hotline only when trouble arises? If you prefer the former to the latter – i.e. help prevent rather than put out fires – it is best to gauge perceptions through interviews with business leaders and even online surveys within the organization.
2) Identify your global gaps: if your company predicts certain key markets are strategic to its future growth, what factors can keep that prediction from becoming a reality? What’s your state of readiness to respond to events in those markets, and what are your early- warning sources? Are you able to capture new opportunities that may arise? To validate answers to these questions it’s useful to conduct a “risk and opportunity” gap analysis of the function’s capacity. Simply lining up a comparison of (1) market revenue projections next to (2) projected public affairs and policy risks and then to (3) existing public affairs capacity in that market can immediately identify where the function is under – or even over – resourced, which can help set a baseline for deciding how to reallocate existing or advocate for new resources. You may be surprised – sometimes the resources you need may be within close reach or be a question of new processes and training.
3) Monitor and manage issues globally: going hand-in-hand with the above gap analysis is the capacity to monitor, prioritize, and manage the vast array of issues impacting your company’s operations and interests. Most major companies are likely to already have an issues monitoring and management system in place for their home markets, so why not have this system in place in markets that matter equally as much if not more? Moreover, most business relevant issues today are cross-border, particularly those issues driven by multi-lateral institutions such as U.N. agencies and international NGOs. Issue management thus needs to be approached from an integrated global perspective. While the idea of “global issues management” can seem overwhelming in terms of information, with the right framework for prioritizing and aligning issues with business goals, it can be a channel for both protecting and growing the business.
4) Engage “glocally”: as a company grows, so do the number and diversity of its stakeholders, which can define the business operating environment and can have a dramatic effect on company value. Taken to a global scale, this stakeholder landscape can become quite complex and challenging to navigate with many pitfalls but also potential opportunities. Identifying and engaging with your company’s stakeholders “glocally” – on both global and local levels – is at the heart of good global public affairs and can help bridge the risk gap in your markets. Effective stakeholder engagement is also a way to demonstrate your commitment to your markets, insuring your license to operate as well as protecting investments.
5) Measure and communicate success: communicating the value of public affairs can at times seem challenging, but international markets offer excellent opportunities to demonstrate measurable value where both business risks and rewards can be intrinsically high. Measurement tools can vary, ranging from the specific such as costs avoided through crises averted or contracts secured with help of public affairs, to the more general such as CSR activity that helped pave the way into a market or executive thought leadership that aligns with a government’s strategic priorities. The common thread with these metrics and others, though, is creating outcomes – and not just outputs – that support business goals. This, in turn, can foster buy-in and position public affairs not just as a cost center to the business but an opportunity center, locally and globally.
Globalizing the function is a journey and will require finding the right processes, structures, and people in place for your organization, but applying the above considerations can provide guiding points along the way and help your organization mind its global gap.