By Oleg Koslov, Head of Internal Audit, Modern Mills, Saudi Arabia
Throughout my career, whether it was carving out operations in Eastern Europe, establishing compliant processes in Australia and New Zealand, or dealing with complexity in Latin America, I understood that building finance operations is much like a Formula 1 race: high stakes, intense preparation, diverse yet precise teamwork, and very little margin for error. Critically, it also demands carefully crafted contingency plans to swiftly and effectively respond when unexpected conditions arise, ensuring operational continuity and resilience, even when something goes wrong.
1. Knowing the Track: Aligning with Local Regulations First
Just as Formula 1 teams carefully analyse each track before a race, finance leaders entering new jurisdictions must ensure their teams are alert and well-prepared to manage global (home country) and local reporting and compliance risks. Similar to how some tracks are straightforward while others present intense complexity, the complexity of establishing finance operations vary significantly from one country to another. Some jurisdictions may closely resemble familiar global standards, whereas others require deep expertise to handle local regulatory complexity.
You will typically face multiple layers of financial reporting, such as US GAAP, local IFRS, and local tax. However, certain jurisdictions require audits of local financial statements based on specific thresholds or company classifications, for example, revenue or assets thresholds defined by the Australian Securities and Investments Commission (ASIC), or criteria set under Brazilian Corporate Law for large companies (Sociedades de Grande Porte).
Moreover, establishing new operations is a cross-functional effort and the responsibilities of a finance leader go well beyond traditional financial reporting. When initiating finance operations in a new jurisdiction, a finance leader should be alert to anti-trust laws, anti-bribery and corruption (ABC) regulations, data protection and privacy laws, as well as specialised global and local industry regulations. For instance, the US Federal Drug Administration (FDA) will require certain companies to track its product from raw material down to the customer. Therefore, considerations for local ERP system should consider the need for GxP validation.
When it comes to compliance and local financial reporting, leveraging global or regional expertise might initially seem efficient and indeed can work seamlessly in jurisdictions closely aligned with international standards, such as UK practices with Australia and the US. My experience clearly shows that this approach may not fit at all in markets with unique or complex regulatory demands, for example China, Ukraine, Kazakhstan or Brazil, where more tailored approach is required to precisely address the complexity anticipated in each new jurisdiction.
From my direct experience, I learned that relying solely on regional advisors may suffice in countries like Australia and New Zealand. Yet, in markets such as Kazakhstan, Ukraine, or certain Latin American countries, directly engaging local legal and compliance experts is crucial. They provide nuanced, up-to-date insights that significantly reduce operational risks.
2. Adapting to Race Conditions: Agility Amid Geopolitical and Economic Shifts
Formula 1 races are often won or lost by a team’s ability to respond to unpredictable race conditions. Similarly, finance operations must be able to swiftly adapt to geopolitical and economic volatility in high-risk or rapidly changing jurisdictions.
When dealing with such challenging environments, robust business continuity planning becomes critical. Multiple scenarios should be regularly reviewed, and operational resilience consistently stress-tested. From personal experience, I’ve become a strong advocate for dedicated cross-functional committees, as I’ve repeatedly seen how diverse expertise and perspectives significantly enhance the quality of analysis, decision-making, and outcomes. Let me highlight several critical scenarios:
Local Capital Restrictions: Local legislation or international sanctions may limit your ability to inject or withdraw capital. Regularly performing scenario-based stress tests around currency conversion or capital-flow restrictions helps ensure your organisation remains financially stable and operationally flexible under diverse regulatory conditions. Strategically structuring your regional legal entities by carefully considering geopolitical nuances further enhances your capital management flexibility.
Supplier and Software Vulnerabilities: There are situations where your company goods remain permissible under political restrictions, while your suppliers might face tighter restrictions from local governments or external authorities. Experience shows that this issue can extend beyond raw materials to include ERP and other essential software suppliers. In such scenarios, implementing a local ERP solution can significantly mitigate risks and reduce reliance on restricted international providers. Additionally, local ERPs often provide considerable cost savings and increased agility, benefits I’ll discuss further in the following sections. When choosing local ERP solutions, prioritise open-code systems to protect business continuity by enabling you to easily switch software support providers if needed.
Data Storage Limitations and Payroll: Given payroll’s sensitive nature and strict local data-storage requirements in many high-risk markets, payroll management becomes an ideal candidate for immediate outsourcing to reputable local third-party providers. At the very least, ensure this capability is clearly outlined as a critical component of your contingency planning.
Operational Diversification: Proactively diversify your operational capabilities by developing strong relationships with reputable local suppliers and counterparties. These relationships enable you to complement or temporarily replace international partners, ensuring continuous and reliable operations regardless of geopolitical shifts or market disruptions.
3. Staying Within the Rules: Embedding Pricing and Anti-Trust Compliance
In Formula 1, adhering to regulations is non-negotiable, with penalties for severe and immediate breaches. Similarly, operating in regulated and politically sensitive markets demands rigorous compliance practices, particularly around pricing, anti-corruption and anti-trust rules.
While finance typically doesn’t own pricing and anti-trust compliance risks, local finance teams play a crucial advisory role, partnering closely with commercial teams in pricing decisions.
Clearly reflecting these compliance-related responsibilities in finance job descriptions helps the compliance function schedule targeted training or ensures that finance teams directly receive the appropriate compliance training.
From a practical finance perspective, embedding structured pricing controls directly into your CRM or ERP systems is essential. This includes clearly defined price build-ups, base prices, discounts, rebates, and surcharges. Approval and escalation processes must be explicitly documented, clearly divided among sales, finance, and pricing committees, and strictly aligned with Delegation of Authority (DoA) thresholds. Robust anti-collusion protocols should accompany these measures.
Deactivating unused or unsuccessful sales quotes promptly prevents unauthorised reapplication. Implement stringent controls around issuing credit and debit notes, ensuring these transactions are not misused as informal discounts or to bypass proper quote authorisations. Every transaction should explicitly document amounts, validity deadlines, specific product details, applicable price lists, and project identifiers.
Leveraging data analytics tools, such as Business Intelligence software, to detect suspicious pricing trends or unusual customer allocation patterns provides another effective layer of control. From experience, I’ve found it particularly beneficial to appoint a dedicated Pricing and Margin Manager (PMM), structured independently from sales or commercial functions to reinforce impartial oversight.
However, managing complex or bundled deals usually require approvals outside standard ERP or CRM, and that’s where building trusted partnerships with sales teams, serving as both business partner and compliance gatekeeper becomes critical. Finance can act as a liaison, bridging sales and compliance functions to enable compliant and commercially attractive offerings.
When it comes to anti-trust and anti-corruption compliance, it demands close monitoring of sales-related expenses and customer interactions. Carefully scrutinise how sales teams plan and execute events, such as meetings organised by customers or local chambers of commerce. Ensuring timely, transparent reporting of these interactions alongside expense claims significantly reduces non-compliance risk.
Whether to record transactions in global or local standards is a common consideration, with distinct advantages and disadvantages for each approach. In my experience, recording transactions directly according to local regulations is usually advisable, especially in jurisdictions with strictly regulated reporting requirements, such as Brazil, Kazakhstan, or certain Eastern European countries. Conversely, in markets closely aligned with international standards – like the US or Australia and New Zealand—it can be more efficient to record directly in global standards, thereby minimising complexity.
4. Fine-Tuning the Engine: Automation to Ease Burden
Formula 1 teams constantly refine their engines to achieve maximum performance with minimal manual intervention.
In jurisdictions with defined statutory charts of accounts, financial reporting compliance involves maintaining precise alignment with prescribed account codes and structures, a global ERP system may not always be suitable, primarily due to high customisation costs.
For instance, countries like Brazil and Kazakhstan strictly dictate invoice templates and frequently update mandatory formats. Constant regulatory changes in volatile markets often make global software maintenance expensive. Conversely, local ERP solutions typically incorporate such requirements and updates automatically, reducing overall costs. In my experience, local ERPs consistently prove less expensive in terms of licensing, implementation, and ongoing maintenance, even considering GxP validation, freeing up budget to invest in a skilled local finance team. Not every jurisdiction has its own robust ERP, but countries with highly complex regulatory landscapes typically do.
Consolidation and reporting at the global level can always be handled separately. And that’s where automation using straightforward Business Intelligence tools, such as Microsoft Power BI, reduces manual workload dramatically. Initially, local teams might have to maintain parallel manual and automated systems. However, once BI logic is rigorously tested, the effort quickly proves justified, significantly decreasing long-term work volume and risk of errors. Additionally, automation tools proactively assist in forecasting and compliance, for instance helping Australian finance teams anticipate ASIC’s reporting thresholds well in advance, removing stress and potential for error.
Finally, deploying advanced analytics and AI tools to assess supply-chain data and identify correlations among various risk factors provides predictive insights to anticipate disruptions before they occur. Nevertheless, human expertise remains indispensable. Your team’s collective experience and judgment are vital in interpreting data nuances, effectively identifying political risks, and anticipating economic volatility, ensuring strategic preparedness and confident decision-making.
5. Pit Crew Precision: Building Cultural Intelligence and Team Alignment
Formula 1 teams succeed through impeccable teamwork and clear communication. This same principle applies to building finance teams across different cultures. Overlooking local work norms and practices creates unnecessary friction, hindering performance. First, as an experienced expat, I would recommend bringing in temporary support from an experienced global finance team member for a short-term assignment (e.g., three months to a year expatriate placement). This person can ensure rapid alignment with global standards and compliance practices, conduct targeted on-the-job training, and bridge cultural and operational gaps until the local team is fully up and running.
As a leader, I learned that some local workplace behaviours could initially appear toxic or unusual from my cultural viewpoint. Therefore, prioritise understanding these local norms deeply, carefully gauging cultural fit during recruitment, as cultural mismatches can drive employee turnover just as strongly as compensation or career growth concerns.
Cultural frictions occur both ways, so a clear communication of global expectations while realistically adapting them to local cultural nuances is crucial. Transparently communicate global expectations about company culture and overtime attitude while openly acknowledging local working styles. Clearly set performance targets from the start significantly reduce friction and build early trust.
6. Finding the Optimal Racing Line: Local vs. Regional Finance Hubs
I’ve experienced both centralised regional hubs and decentralised local finance teams, choosing between them is like selecting the optimal racing line on a Formula 1 track. Regional hubs can indeed be effective when regulatory frameworks and cultures closely align, but their value diminishes significantly in highly regulated or rapidly evolving jurisdictions.
In contrast, I’ve observed that empowered local finance teams in countries like Brazil, the Philippines, or Kazakhstan consistently deliver superior outcomes, particularly when managing culturally sensitive interactions or complex regulatory relationships with local governments. Additionally, regional hubs typically operate from high-cost locations such as Switzerland or Singapore, meaning that reducing some reliance on expensive regional roles can free up budgets to significantly strengthen local teams.
Therefore, for higher-risk jurisdictions, regional hubs work best when they act primarily as centres of excellence, offering strategic oversight and expertise rather than direct operational control. While managing geographically dispersed teams can seem complicated, I’ve found it can be highly effective when supported by robust daily management practices and communication tools.
7. Crossing the Finish Line: Ensuring Long-term Compliance Success
Successfully setting up finance operations in new jurisdictions, much like winning a Formula 1 race, requires meticulous preparation, robust governance frameworks, agile decision-making, and exceptional teamwork. By focusing on local alignment first, leveraging automation effectively, deeply embedding compliance measures, respecting cultural differences, and maintaining operational agility, your organisation can confidently navigate complexity and achieve sustained compliance success.
Additionally, culturally sensitive processes like collections often yield better results when managed locally. By contrast, tasks such as entering journal entries can typically be handled from any location.
Increasingly, many jurisdictions mandate storing sensitive personal data, such as payroll details or customer data on local servers, a requirement that global ERPs often don’t readily accommodate. Even though IT teams in larger organisations may attempt to address these nuances, finance leaders must remain proactive and alert, rather than relying exclusively on IT or compliance teams to manage these critical details.
Ultimately, just as precision, adaptability, and collaboration allow Formula 1 teams to excel under pressure, applying these principles to compliance and finance functions ensures not just regulatory adherence, but lasting organisational strength and resilience.
