The formula for success for cross-border growth used to be focused almost solely on beating competitors in a race to launch first. Bringing a new product or service to market before it is available was the top priority but now there is much greater emphasis on risk.
Rapid market entry can leave businesses exposed to repercussions later down the line. With stricter regulations to adhere to and a never-ending conveyor belt of digital risks to navigate, a more cautious approach is now much more common.
These are some of the reasons why risk maturity has become increasingly important for cross-border digital growth:
Increased Digital Risks
In recent years, the number and frequency of digital scams have increased significantly and this is a big concern for cross-border expansion. When businesses are operating across borders, this means there is an increased risk of attacks as there are more entry points that can be targeted. Businesses will use more third-party suppliers when operating across multiple locations too, which further increases risk.
Therefore, when businesses are planning growth into new territories, risk management has to be at the core of their strategic planning.
Stronger Regulatory Enforcement
Regulations around data protection and security are getting stricter with more collaboration across borders. Payment regulations, gambling laws and fintech regulations are becoming more standardized, so while businesses could previously have more leeway in some regions, compliance with local laws involves more work.
Moving data across different countries is also a higher risk with many countries restricting data exporting. Compliance requirements can be conflicting across different countries, so compliance teams must establish effective processes to comply with the various rules.
Regulators are now able to utilize modern technology to monitor compliance, making it easier to identify non-compliant organizations and enforce penalties. Substantial fines are often applied, so rushing products out to market without ensuring regulatory compliance can have severe financial consequences.
Risk of Reputational Damage
If a company is found to be in breach of regulations or they have failed to protect their customers adequately, reputational damage is another consequence with major ramifications. A data breach will often cause negative media which will break trust in the company and could lead to existing customers ending their relationship with the company and put prospective customers off using them in future.
Stricter Licensing Requirements
For industries such as online casinos, licensing requirements have been strengthened in many countries. The rapid growth of online casinos made it difficult for governments to introduce robust regulatory frameworks at the same pace, which meant that online casino operators had less requirements to meet.
Across the world, the regulations for online casinos have become stricter to protect bettors. Requirements such as independent auditing of fair gaming, having adequate payment security and fraud protection measures are now common criteria for obtaining casino licenses.
Casino operators also have to comply with responsible gambling rules, by implementing measures that support bettors and help to prevent problem gambling You can see here at Tikal Casino Germany under the ‘Responsible gambling’ section there is a list of the different measures that they have in place such as setting limits on deposits, wagers and losses. For casinos operating across different geographical boundaries, like Germany, France, and Poland, there are varying rules that they need to adhere to, depending on the location of the bettor. The risk of non-compliance is that a license could be revoked or the operator could be fined, so the risk management processes implemented to ensure compliance need to be at the top of the list of priorities.
Conclusion: Businesses Cannot Afford to Overlook Risk Maturity in Cross-Border Growth Strategies
For businesses who are considering expanding into new territories, risk maturity should precede all other elements of their business strategies. Being the first to market is still important to claim a large market share but if they do so without ensuring risk management is effective, the consequences can far outweigh the risk of being slower to market.
Severe fines and reputational damage can drive a company into bankruptcy, as we have seen with high profile cases. Around 60% of small companies close within six months of being hacked.
Even larger companies with bigger resources to invest in risk management have been forced into closure. Foreign currency exchange company TravelEx were victims of a ransomware attack which closed down their operations across 30 countries. The pandemic was arguably a major factor too but the challenges faced in responding to recover the cross-border systems proved to be too difficult to overcome.
The importance of risk maturity is paramount for successful cross-border digital growth and with regulatory requirements and digital dangers increasing, managing risk will continue to be essential.
