Larry Harding

The 20-plus year trend towards generally decreasing government intervention in the world of business has come to a screeching halt.

The reasons are numerous and well chronicled. Yes, a great deal of the momentum shift has been a reaction to the global recession. Policy makers are trying to finance needed tax revenues and correct the damage done by markets where, in retrospect, there was too little regulation (see banking, mortgages).

The resurgence in government intervention has also been driven by other factors, such as the need to improve infrastructure after years of neglect. In many instances, the changes are simply a result of the normal shifts in the political winds.

For businesses operating beyond their borders, the impact of increased government intervention is exponentially more challenging. Each country has its own set of laws related to corporate formation, taxation, human resources and compliance. The rules for each of these issues can vary from country to country, often from region to region. And the penalties for non-compliance can be stiff.

Companies, especially small and mid-sized operations with limited expertise and resources for global expansion, are exposed to significant risk. It is critically important that businesses understand how aggressive government authorities can be for each country they enter.

As businesses put the finishing touches on their 2010 operating plans, it's important to assess the role that United States and overseas federal, state, municipal, provincial and local governments could have on business expectations. Here are four key issues to consider:

Find Out What is New

Not knowing what you don't know is the single scariest realization for anyone running a business. It is challenging enough for a U.S. company to stay apprised of changes in federal and state regulations, but remaining current on the changes taking place in markets like India, China or the countries of the European Union can seem like an insurmountable task. And you can be certain there will be plenty of changes in 2010. For example, there will be a much wider scope of transactions liable to the business tax (a tax on revenues) in China.

Meanwhile, in the EU, there will be significant value-added tax changes. Businesses should proactively work with their advisors and local partners to determine what changes are being made and what, if any, business processes must be implemented to accommodate the new regulations.

If you don't already have advisors and local partners in foreign markets where you are operating you should find some immediately.

Examine the Risks and Constraints of New Governmental Regulations

Once your business has garnered as much good information as possible on the changing nature of government regulations in the territories you are operating in, then you must make a frank assessment about the potential impacts the new rules will have on your operating model.

In many cases, the changes will not force you to change course. However, there may be instances where the new regulations may weaken your approach. At this point, the management team must come to grips with the new reality. If you must make difficult choices, make them now.

It is unwise to ignore information simply because it does not conform to the original business plan.

Consider Your Customers

Keep in mind that your customers are being impacted by new government rules just as much as your business. There will probably be instances where you have to make adjustments in order to accommodate a customer's situation.

For instance, in Massachusetts and certain other U.S. states, the government has significantly clamped down on the types of products, services and even entertainment that can be provided by pharmaceutical and medical supply companies to doctors and hospitals.

These changes have had a trickle down effect on the marketing promotion companies who supply the items historically given to physicians and hospital officials. Astute organizations have made significant adjustments in their operating model to account for these changes and can better serve their clients.

Since a business is only as strong as its customers and its markets, it is imperative that you understand the impact of new government rules on both your business and your customers.

Be Careful of the "Opportunities" Created by Government Spending

Yes, the government can taketh away; but it can also giveth. The year 2009 has seen G20 countries like the United States, China and India inject unprecedented levels of stimulus spending into their economies. Those dollars, yuans (renminbis) and rupees are going to be spent in a variety of places. Many businesses, along with their customers and partners, have been scrambling to earn a share of this spending.

It is important, however, for businesses to constantly assess government spending. These programs have a tendency to change quickly and unexpectedly. For example, at a recent World Economic Forum in New Delhi, Indian Prime Minister Manmohan Singh indicated that his country might be the first economy to withdraw its economic stimulus measures, saying that the Indian economy had a good chance of growing by 7 percent in 2010.

Assessing the impact of increased governmental intervention is a lot like assessing any other variable.

The key is to have more and better information than your competitor, strategically plan for how your specific business can take advantage of the opportunities and minimize the risks of this trend, and be adept at thinking on your feet as reality begins to differ from your expectations.

Larry Harding is founder and president of High Street Partners, a global advisory services firm which offers cross-border accounting, finance, tax, compliance and human-resources-related services to organizations doing business internationally. Contact him at http://www.linkedin.com/pub/larry-harding/8/614/a98.