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When considering entering a foreign country, what are the top considerations for the CFO? (Webinar Attendee Question)

This question was asked during the Proformative webinar "Going Global: Expanding Internationally the Right Way."  A video of the webinar can be viewed here: https://www.proformative.com/resources/webinar-video-going-global-expanding-internationally-right-way

Answers

Gary Spencer
Title: Managing Partner
Company: Meon
(Managing Partner, Meon) |

These are a few things that I would consider when entering a foreign country:

* People. Will there be an expansive base of persons or person to interact with the local populace and business entities.

* Technology. Will the foreign countries technology base allow the CFO to interact and integrate systems on a seamless base.

* Language. Will the CFO or someone be able to communicate fluently in that countries native language. There is nothing more insulting than claiming to speak another language and all that you can say is hello. Be truthful.

* Market share. How much of the market share of that foreign entity is controlled by a local business. The incoming company may pose a serious threat to business as usual.

* Flexibility. How flexible is the CFO going to be when entering someone else's back yard. When you are in another market, you have to play by their rules. You have to think as them. "When in Rome do as the Romans do."

These are just a few things that I thought of right off the top of my head. I am sure that there is a vast amount of other options available to the CFO who seeks to expand their companies horizons.

Ted Monohon
Title: VP -Finance / Controller
Company: Fantex
(VP -Finance / Controller, Fantex) |

You cannot underestimate the culture, business norms, and legal requirements.

*Does the employee base expect regular and frequent pay raises?
*Are bonuses merit based or just deferred salary?
*How difficult is it to terminate employees? What are the leave policies?
*Are you going to get 100% productivity from your international employee base?

Also if you plan on using an ex-pat, please understand the tax complexities and huge expense it involves.

Corporate tax impacts also can become large issues if you don't get good advice or plan properly. The foreign account reporting required by the IRS is also one additional hurdle and hassle

Controls over foreign assets can be difficult so strong controls over small portable but expensive assets need to be established as well as acess over cash.

Lastly, most countries require a legal representative who can be held personally responsible for illegal acts or losses. Think carefully about who you want in this role and make sure you corporate D&O policy covers them.

Don't go internationally on a whim. It is an expensive commitment that will occupy a large amount of your time.

Harold D. Tamayo
Title: Vice President of Finance
Company: MHA Inc., a Roper Technologies Company
LinkedIn Profile
(Vice President of Finance, MHA Inc., a Roper Technologies Company) |

What the contributors have said is great and accurate in my opinion. I would add:
- Very strong controls and governance
- Local leadership and keep to a minimum the expats as they can be heavy on the admin costs for a local operation and can have a hard time culturally unless they have experience with the market
- Use expats on trusted leadership roles to oversee HQ interests
- DSO/DPO very carefully tracked and controlled. It can get ugly quickly
- Patience if is a US based company. The nature of doing business abroad is more like base hits in a baseball game rather than home runs
- Act quickly when issues arise. Many companies dismiss the issues because the foreign operation is not fiscally material until there are severe financial collapses

Topic Expert
Doug Thompson
Title: Director of Revenue
Company: Castlight Health
(Director of Revenue, Castlight Health) |

In global enterprise software companies I have worked in, the customer contracts are all with the US entity even when there are local sales people in the foreign subsidiaries. This protects IP and is smart from a tax perspective.

Topic Expert
International Representative
Title: International Expert
Company: Nair & Co.
(International Expert , Nair & Co.) |

Likely sales volume that can be generated and consequential ROI, employment and regulatory exposures and how they can be mitigated, data privacy exposures (if Europe or Australia) and the personal risks he runs if he agrees to be a director of a foreign subsidiary.

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