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  • Geoff Donald

Importance of Government Affairs

Updated: Oct 1, 2020

Why you should be engaging with the Government

For many firms, government engagement is limited to taxes being paid and conforming with the various regulations that must be followed. Otherwise, engaging with the various levels of government is viewed as something that takes focus away from the core purposes of business, painful, and something that should be minimized at all costs.

Until at least something goes wrong. Whether it is a seized shipment, key personnel are denied visas, or a new law or regulation is about to be imposed directly impacting the company, companies soon realize that there is a need to engage with a government.

Too often, in order to get an immediate resolution, the company races to a government official or their local representative to demand support, help or resolution to their problem.

The problem with this process is two-fold.

1) Companies are now in “fire-fighting” mode which may be able to solve the immediate problem, but it might cause long-term issues especially future relationships with government officials.

2) If the two sides have never met before nor are aware of each side needs and challenges, then the outcome for a successful resolution to that company’s problem is very small.

One step that companies often attempt to take is to approach the head of government directly without previously engaging other levels of government. This is an extremely risky move that more often or not results in the matter being turned back over to the government officials or can result in a negative decision from the leader of government. Leaders of government, being human, rarely like changing their mind especially after they have said no.

Impact of Goverment on business value

In 2013, McKinsey & Company released a report that showing that the business value at stake from government and regulatory intervention is huge: about 30 percent of earnings for companies in most industries, and higher still in the banking sector, where the figure tops 50 percent.

Despite this large impact on business value, too many companies do not invest the necessary resources, personnel or time necessary to manage these relationships. In fact, the above McKinsey report noted that “only about 20 percent of executives reported frequent success at influencing government policy and regulatory decisions —a proportion that has not increased in the four years we’ve conducted the survey.”

Companies need to realize that governments have a direct impact on the value of their business and that any legal, regulatory or financial changes by the government can have a direct impact on their bottom line. Are you aware of what your business value is at stake due to government intervention?

Steps you need to take

While large companies often have personnel dedicated to corporate affairs, for small and medium size companies this is can be more difficult or impossible to assign a single individual or department to government relations. Yet, it is crucial that all companies develop a plan that allows them to track what government activities may impact them, who their stakeholders are, and an action plan for consistent engagement with government officials.

One valuable ally for companies of all size are either business or industry groups. The groups should be actively monitoring key and engaging with government officials on those issues and the potential impact on their members. However, you should not expect your membership of a business group to replace the need to develop a government engagement plan for your company.

If you do need help in developing a plan, looking to solve an immediate problem, or are looking for other options, Asia Engagement Consulting Group would be happy to work with you to develop the necessary strategies and tools in order to make sure that you have an effective and constructive relationships with government stakeholders.

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