I don't think many people in Canada could have predicted July's attempted coup d'état in Turkey, or the fact that the coup failed, giving Turkish President Recep Tayyip Erdogan an excuse to declare a state of emergency and purge the civil service of almost 50,000 employees (including almost 3,000 judges and prosecutors), effectively dispensing with the rule of law in that country.
Certainly, since the so-called "Arab Spring" in 2011, Egypt has had a military coup, Syria has descended into civil war, Libya has largely disintegrated as a nation state and ISIL, or Islamic State, has used terror tactics in its attempt to establish a medieval caliphate out of the ruins of its conquered territories (terrifying the Middle East, Europe and North America in the process).
Russia is more aggressive now than at any other time since the collapse of the Soviet Union, seizing Ukrainian Crimea in 2014 and recently causing Prime Minister Justin Trudeau to send military support to Latvia as part of a NATO mission. China is blatantly ignoring an international arbitration decision over islands in the South China Sea (which it effectively believes is a "Chinese lake"), calling into question any nation's ability to settle territorial, maritime or other disputes through legal means when the other nation simply thumbs its nose at international law.
It's a dangerous world and arguably getting more dangerous. But from a business perspective, if the potential for profit and growth isn't in Western Europe or North America any more, businesses will take more risks in dangerous and unstable countries, in countries where governments are corrupt, or where revolutions or coups d'état are possible. Indeed, some of the world's most desirable resources aren't in the world's most hospitable places any more, and that causes businesses to expand to countries that may not want them there, or whose leaders seek to extricate bribes payable to "friends and family" of the ruling regime (creating a massive problem for business if the regime changes).
Accordingly, if you're planning to expand your business internationally, or enter into sales, distribution or licensing agreements with principals in volatile regions, or even export your products and services (and perhaps some of your managerial personnel), how do you weigh the risk? How risky is your planned investment in places like Dubai, Lagos, Dar es Salaam or Guadalajara? How safe are your employees in Islamabad or the Philippines and do you have to consider so-called "K & R" insurance coverage to deal with their potential kidnapping and ransom? Should you grant master franchise rights in Brazil given the country's insolvency and the Zika virus? Can you resolve a potential business dispute fairly in the courts of the target market, or are the courts just a tool of the government and its ruling oligarchs?
There are some basic online tools available to help you familiarize yourself with political and economic risk before you make your investment. For example, the Council on Foreign Relations maintains a website here that gives fairly thorough information on world conflicts that affect U.S. business interests, and includes links to articles, business information and columns helpful to any business that is either expanding to more dangerous parts of the world, or considering expansion.
In Canada, Export Development Canada provides Canadian exporters with financing, insurance, bonding services and foreign-market expertise. But it is also a good resource in terms of the political risks that Canadian exporters may discover in certain countries. Its quarterly "ExportWise" is a Web-based publication that is essential reading for any Canadian business wishing to export to volatile regions, and the site includes a quarterly "Country Risk Summary" available here. Likewise, the Canadian Trade Commissioner Service also supports Canadian business in other nations and maintains offices within Canadian embassies and consulates throughout the world.
Canadian businesses should also be aware of corruption. Transparency International has developed what it calls a "CPI" (Corruption Perception Index) which measures the perception of the degree of corruption in various countries and also includes references to the OECD Anti-Bribery Convention, (and whether anti-corruption laws are actually enforced).
For Canadian franchisors, the International Franchise Association has information on other countries for companies considering the expansion of their franchise systems. As well, you might want to check out the Ease of Doing Business Ranking, which is determined by the World Bank Group and examines regulatory conditions in 189 economies.
Certainly, you and your employees should always pay attention to the Government of Canada's regularly updated travel advisories, available here. Not only will these advisories include information on entry and exit requirements, but they will provide warnings about particular countries and regions within those countries. And it's essential to read those Canadian government travel advisories against the fine print of your travel-insurance policy (or travel insurance acquired as part of your credit card). In some cases, your travel-insurance policy won't cover certain types of political and security risks such as war and terrorism, while others cease to have effect if you still opt to travel to a country after advisories against "all but essential travel" have been issued. (In July, 2016, Canadians were advised to avoid all "non-essential travel" to Turkey and Egypt, meaning that travel-insurance policies to those countries might be limited or void.)
For more comprehensive country or region analyses, you might want to retain the services of experts. David Chmiel is managing director of Global Torchlight, a London-based group that advises clients on political stability, security and risk assessment worldwide. The company assesses threats such as terrorism and political violence, civil and sub-state conflict, regional instability, strategic competition, interstate relations, armed conflict and domestic military activity, regime stability and legal security, as well as foreign government interference in economic and financial affairs.
"Understanding the political and security-risk environment in a country or region involves looking beyond what's currently in the newspaper," Mr. Chmiel told The Globe and Mail. "The companies that adapt best to doing business globally are more often the ones that seek to understand the history and culture of the target market. For example, challenges with China are deeply rooted in how it perceives its historic relationship with the West and Japan. The crisis in Ukraine is built on a thousand years of history and the continued challenges that Russia faces in coming to terms with the collapse of the Soviet Union and its loss of status as one of the world's two superpowers.
"An understanding of political and security risk is not a static exercise" he says. "You don't simply look at these issues at the time of entry into a market and then file that assessment away. Events evolve rapidly and nations that might otherwise be thought of as highly stable may actually have political foundations built on shifting sands. Companies with international aspirations need to regularly reassess these issues to determine how, if at all, they are changing."
Accordingly, although some of the Web-based tools discussed above may be helpful, it's essential for businesses considering global expansion to develop more comprehensive strategies to manage and mitigate geopolitical risk. They should undertake extensive due diligence of the region, the respective judicial system and, if possible, the legitimacy and trustworthiness of potential local partners. Aspiring global businesses should also monitor developments closely and regularly to identify challenges before they become acute, and have crisis-management strategies in place from day one, rather than developing them when the crisis emerges.
In short, before you expand to other global markets, you have to do a lot of homework.
Tony Wilson is a franchising, licensing and intellectual-property lawyer at Boughton Law Corp. in Vancouver. He is an adjunct professor at Simon Fraser University, teaches legal ethics at Thompson Rivers University law school and is a bencher of the Law Society of B.C. He is the author of two books: Manage Your Online Reputation and Buying a Franchise in Canada. His opinions do not reflect those of the Law Society of B.C., SFU, TRU or any other organization.