The “Resilience” of Emerging Markets

(CNN: Business 360, 31 January 2012)

In Brief: Earlier this week, CNN Global Exchange gathered a group of “financial experts” to discuss the outlook for emerging markets in 2012, and whether these markets would be able to withstand the potential negative consequences of the EU debt crisis. According to one panelist, emerging markets “have great resilience,” but must “change the mix of their economy, focusing much more on their internal markets.”

Our View: By 2030, emerging economies are expected to account for 59% of global GDP, and investors are already awarding premium valuations to companies with significant emerging markets exposure. While companies are well aware of the risks of operating in these foreign markets, they may fail to take the proper steps to mitigate them in the race to gain competitive advantage. We advise Internal Audit to closely evaluate the effectiveness and efficiency of the control environment in their firm’s international operations, and to highlight inconsistencies in process design and management practices. Also, assess business continuity and crisis management plans to ensure that a rapid and comprehensive response is possible in case any unexpected event occurs.