Innocence abroad

Regrettably, some of us will have an unwelcome brush with the more unscrupulous locals and part company with more cash than we had planned. It’s a common tale and one that is becoming depressingly familiar to firms that operate overseas. As a report from Pricewaterhouse Coopers shows this week, it’s not just when you’re on holiday abroad that you need to hang onto your wallet. The report reveals that about 40% of construction firms have been hit by fraud, theft or embezzlement in the past two years, costing each firm on average £1.5m. Definitely a tad more painful than having your camera swiped from a cafe.

In the same week we report that a number of companies are having a sudden attack of doubt about rushing into Russia – doubts that have been strengthened by the extraordinary tale of the boss of a BP joint venture in the country who was forced to go into hiding to escape his Russian “partners”.

All of this comes at a time when, as the chief executive of a £1bn-turnover company put it this week, “… business is looking shakier than ever for the next year or two in the UK”. As a result, the urge to go east, west and numerous points in between has never been stronger. Larger firms such as Atkins, Carillion and Davis Langdon have, of course, had substantial overseas businesses for some time, but increasingly the lure of eastern Europe, India, China and Russia has been proving hard to resist for other players, too.

The report reveals that about 40% of construction firms have been hit by fraud, theft or embezzlement in the past two years, costing each firm on average £1.5m

Unfortunately, some of these – particularly eastern Europe and Russia – are places that PwC highlights as those most at risk of “economic crimes”. In eastern Europe, a staggering 40% of firms have been asked to pay a bribe, while the theft of ideas and innovations – always a problem in China and other Far Eastern markets – has stung western European businesses particularly badly. There is obviously an issue of business ethics here, too: do you turn a blind eye to win a lucrative deal?

The companies, such as groundwork specialist Keller, that have made a long-term success of growing an international business are clear on this last point: you should only work with partners you are comfortable with. Keller and others have grown by carrying out exhaustive due diligence on their potential business partners and employing local people wherever possible. As a result, Keller claims never to have experienced serious fraud. As far as paying bribes is concerned, this is strictly prohibited and anyone caught doing it is disciplined or sacked.

What all firms with international businesses will say, however, is that, although important, the issue of fraud pales into insignificance when set against the problem of not getting paid. For instance, cheques in Gulf and other Middle Eastern countries often have to be signed by two people and getting that second signature can prove surprisingly difficult. At least we know that some things are not entirely different overseas …