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Apex Group: The Return of International Business Expansion in 2022

Michiel van der Maat Head of Corporate Solutions - Business ExpressMichiel van der Maat, Head of Corporate Solutions – Netherlands, Apex Group Ltd.

As we begin to emerge from the global pandemic, despite imminent headwinds, companies with global exposure are increasingly optimistic about the commercial opportunities beyond their domestic markets.Despite continued unpredictability, J.P. Morgan’s 2021 Business Leaders Outlook (BLO) survey shows that business leaders are adapting – and are seeking opportunities to grow globally, at the same levels as pre-pandemic levels. A report carried out by CFO research found that 45% of respondents were currently or planning to expand their business to overseas markets.

While the pandemic has been challenging for business, many have embraced more flexible business models, and with accelerated technology adoption, digitization of processes – the world remains inter-connected despite a reduction in cross-border travel.

Growing a business internationally requires long-term planning and the right support to ensure a robust platform for future growth.  Here, we ask why companies are returning to international expansion in pursuit of growth, potential challenges, and how to overcome them to make the most of these new opportunities.

Why is international expansion back on the agenda?

JP Morgan’s research shows that capturing a greater market share was the top reason business leaders cited for their desire to expand internationally, as well as increasing revenue from sales, the ability to diversify investments, and access new pools of talent.Whilst companies are largely inspired to start international business expansions to generate more revenue, there are several benefits to changing your business model and going global. Not least because the coronavirus crisis has unlocked a new digital age making it even easier to connect with potential customers in a foreign country.

With issues such as labor shortages, severe bottlenecks in global supply chains and evolving customer expectations, it can be discouraging to consider international expansion at this time. However, according to the survey, executives remain optimistic. Those surveyed cited access to new customers/markets (72%), better opportunities to serve domestic customers with global operations (37%) and access to suppliers/materials (34%) as key reasons for expansion.

What should a company consider before expanding overseas?

When expanding overseas, organizationsare typically looking for regulatory consistency, strong demand for their services& products, and a stable political and economic backdrop. Nonetheless, however attractive the business environment, youneed to be prepared before taking the plunge.

  1. Getting started

The time it takes to set-upa presence in a new jurisdiction can vary significantly from country to country. In some countries it may take weeks to set up, while in other countries it may be done within a matter of days.

For example there can be differences in incorporation process,involvement of a notary, local board and shareholder representation, registered address requirements, mandatory local bank accounts, capital and registration requirementsamongst others.

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Depending on the business, you will need to consider what operations will be needed in new market:  “Do you require local presence through a formal legal entity (e.g. limited liability company) or would a branch or representative office suffice?” Apart from the differences in the time, money and resources needed to set up a legal entity instead of a branch, the legal, tax and other corporate governance requirements can vary significantly.

  1. Partnering with local experts

With global regulatory compliance requirements evolving rapidly, it is key to have a good understanding of how business operations may trigger obligations when entering a new market.

When operating in a new market, it’s all too easy to get caught out by new legislation and regulation. New and specific regulations may apply requiring an alphabet soup of licenses under before operations can be conducted: AIFMD, REACH, EMA/FDA, SFDR, GDPR, the list goes on…

Similarly, when expanding into a new market, you may find that most daily bookkeeping and financial reporting can still be done by a centralized finance team. However, annual statutory and tax reporting and filing obligations require local knowledge, especially when filing exemptions or extensions may exist or specific tax reporting is required.

The best way to navigate this local complexity and red tape is to work with a local expert, helping you to understandthe hoops you will need to jump through.

  1. Understand global human capital

You’ll need to be aware of local employment practices and laws. Company HR policies, employee benefits and incentive plans cannot always be implemented the same way for your employeesglobally. As a result of the global pandemic, hybrid and other forms of remote working are here to stay. With more staff working from remote and across jurisdictions, global companies need to understand how rules, regulations and taxes apply differently in jurisdictions.

This is where corporate service providers can assist and provide local knowledge, and help reduce the need for local HR managerswhen employing teams in various different markets.

About Apex Group

Apex Group Ltd., established in Bermuda in 2003, is a global financial services provider. With over 50 offices worldwide and 8,000 employees upon the close of announced acquisitions, Apex delivers an extensive range of services to asset managers, capital markets, private clients and family offices. The Group has continually improved and evolved its capabilities to offer a single-source solution through establishing the broadest range of services in the industry; including fund services, digital onboarding and bank accounts, depositary, custody and super ManCo services, business services including HR and Payroll and a pioneering ESG Ratings and Advisory service for private companies.

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