The UK’s standard of corporate governance, framework of laws and policies, and business friendly environment enable productive international engagement and collaboration. Overseas parties welcome the chance to engage with British organisations, be that at home or overseas.
There were 2,072 new foreign direct investment projects in the UK in 2017-2018. 75,968 new jobs were created as a result.
There is a global demand for British goods and services. In 2018 UK exports totalled £637bn and the Government’s Export Strategy aims to continue to increase exports as a proportion of UK GDP to 35%, making the UK one of the G7’s most successful exporters.
8 of the 10 fastest growing markets for UK exports since 2010 were outside of the EU. Exports of services to the key non-EU markets of USA, China and Japan have all increased by more than 85% since 2010.
Global trade is growing and changing rapidly, and presents significant opportunities for UK businesses. This includes establishing a presence in emerging markets, collaborating with international institutions on research and development to secure future growth, and identifying more effective and efficient supply chains. Engaging with overseas parties can also expose you to considerable risks. An open approach to international business should include measures to protect your long-term profitability, reputation, and the national security of the UK.
This may be applicable to you regardless of the size of your organisation.
In the US, the Independent Commission on the Theft of Intellectual Property estimates that the annual cost to the US economy exceeds $225bn in counterfeit goods, pirated software, and theft of trade secrets and could be as high as $600bn. In Europe, the Centre for Strategic and International Studies suggests that, conservatively, cyber espionage could cost 1.5% of a country’s GDP.
Senior executives and board members are responsible for setting the strategy for their business. This advice can guide how you consider security when making commercial decisions and engaging with overseas parties, as well as ways in which you can manage the risks.
Considering security at an early stage is essential to ensuring any benefits realised are sustainable in the long term, as well as safeguarding your interests, the safety of your people, and the national security of the UK.
You might wonder what national security has to do with your business
Hostile actors seek non-public information from a broad range of sectors, including industry, especially if it relates to defence, advanced technology, manufacturing, or bulk data. These actors can, at times, be backed by a foreign state which aims to undermine UK interests at home or overseas.
Hostile actors will try to gain access to financial and personal information as well as commercially sensitive material. This can be used to covertly influence government and business decision-making and to advance the hostile actor’s own interests. It does not matter if the information is gained through legitimate or illegitimate means if the intention for its use is nefarious.
It may not matter if the overseas party you are engaging with is state-owned or not as its home state may still be able to exercise a level of control over the party and intervene in areas of interest to them. In an authoritarian state there is little difference between a state-owned enterprise and a private company.
When engaging with overseas parties who are directed and supported by foreign states, the level of central co-ordination and the lack of transparency is what differentiates it from commercial undertakings entered into in good faith and usual diplomacy.
Hostile actors can cause serious financial or reputational damage to UK individuals and businesses.
Examples could include:
- the details of your company’s negotiating position being obtained and shared with the overseas party that you are planning on doing business with;
- details of your company’s technology, manufacturing processes, or research and innovation being acquired and shared, thus putting your competitors at an advantage and undermining your long term profitability;
- details of your business’ IT network and security processes being gathered and passed on, which could make it easier for a hostile actor to exfiltrate sensitive data or threaten its network.
Alongside state-backed entities there are other hostile actors, such as serious crime groups and hackers, who can exploit commercial interactions and behave fraudulently to undermine the UK’s national security and economic well-being.
Here are some places to look for further information: