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1. Emerging Markets CONTENT SHOWCASE LexisNexis® Due Diligence & Monitoring Solutions 1 E ME RG I NG MA RK E T S CO NT E NT S HO W CA S E

2. Due diligence is fundamental prior to engaging with any third-party entity or individual. This should include investigations into: The Certainty of Risk Emerging markets represent untapped potential for today’s Understanding and managing risk is crucial when planning an emerging market strategy. Organisations that want to take advantage of growth opportunities in what is traditionally referred to as “BRIC” nations—Brazil, Russia, India, and China—as well as other emerging markets in Latin America, the Middle East, and Africa, need to consider the significant risks that these markets pose. global organizations, but with the promise of opportunity • Identity documentation comes a certainty of risk. Whether organisations are • Financial health • Source of wealth and funds considering entering an emerging market through mergers • Beneficial ownership • Corporate structure for entities and acquisitions or joint ventures, establishing company- • Negative News • Company Data owned facilities, or engaging third parties as suppliers, • Industry Reports But organisations must look beyond the standard checks when it comes to third parties in emerging markets. Evaluating risks based on a PESTLE framework allows organisations to quickly identify some of the most frequent challenges within emerging markets. sales agents, or distributors,they need to implement processes to manage risk, including enhanced due diligence and ongoing monitoring that leverages a diverse collection of relevant content. E ME RG I NG MA RK E T S CO NT E NT S HO W CA S E 1 E ME RG I NG MA RK E T S CO NT E NT S HO W CA S E

3. Lapses in managing these PESTLE risks expose organisations to reputational, financial, regulatory, and strategic risks. But with the right combination of technology and content, organisations can unlock the potential rewards of conducting business in emerging markets, while at the same time, protecting against the myriad risks they face. What do PESTLE risks look like in emerging markets? Nearly 80 percent of global economic growth comes from emerging market and developing economies, reflecting a 2X higher share than two decades ago. - International Monetary Fund Countries labeled with yellow indicate emerging markets 3 2 E ME RG I NG MA RK E T S CO NT E NT S HO W CA S E

4. A Framework for Monitoring Risk Socio-cultural Risk—Typically, organisations do the proper legwork to understand a consumer culture and tastes before launching a product in an emerging market. But that isn’t the only socio-cultural risk organisations must address. Transparency International’s Corruption Perception Index shows a higher propensity for corruption in emerging markets. Bribery is often seen as an expected cost of doing business, which exposes organisations to higher regulatory risk. In addition, the use of child labor is more common in emerging markets, putting organisations at greater reputational risk as well. T E Political —Emerging markets often feature a volatile political landscape. Political instability can lead to an unstable business environment. Economic Risk—An uncertain economic landscape can lead to inflation/deflation, along with vast fluctuations in demand and unpredictable consumption patterns. Moreover, organisations face vulnerability to currency volatility. Other red flags related to financial stability of the actual entity being investigated include financial results that are inconsistent with expectations—whether positive or negative—as well as unusual payment patterns or financial arrangements such as unusually high commissions received or paid. Technological Risk—Emerging markets, by definition, are just coming into their own— likely as a combined result of rapid growth and industrialization. As a result, emerging markets may have a lack of infrastructure to support the needs of organisations, adding to supply chain and logistics costs. Infrastructure shortcomings can also impact the availability of a consistent source of power or access to critical technologies and individuals who can maintain or repair them. The political climate in the Middle East/ North Africa has been volatile for decades. Wealth and resources aside—because the Middle East is replete with both—the region faces critical political challenges. As the Center for Strategic & International Studies notes, “Libya is divided by civil war, and Lebanon and Egypt face serious internal stability problems. The Gulf states are generally wealthier, but not necessarily more stable. Yemen and Somalia are also divided by civil wars, with governance and economic problems as great as their security challenges.”1 Even as the government cracks down on the exploitation of children, child labor remains a problem in Brazil. According to a study by the Brazilian Institute of Geography and Statistics (IBGE), 5 percent of children between the ages of 5 and17 are economically active.2 While the number has declined by 20 percent, 5 percent still represents too many children forced to labor in restaurants, farms and mines—and a significant threat to organisations’ reputations when child labor is uncovered in their supply chains. Technological risk can result from political instability as well. The ongoing conflict between the Ukraine and Russia has led to coal shortages in western Ukraine, depriving industries of the energy need to stay in business. Despite its growing economy, Brazil has struggled with inflation in the past decade. Inflation has had a trickle-down effect on regulated prices for electricity, fuel, and water which directly impacts production and distribution, as well as on disposable income which directly impacts sales. P S 5 E ME RG I NG MA RK E T S CO NT E NT S HO W CA S E 4 E ME RG I NG MA RK E T S CO NT E NT S HO W CA S E

5. Content from LexisNexis® Environmental Risk—Because emerging markets are rapidly industrializing, environmental laws and regulations are still developing, which increases risk. But in addition to a changing legal landscape, organisations must also consider the increased threat of natural disasters like earthquakes, tsunamis and floods and weather-related problems like droughts or blizzards that can disrupt supply chains and lead to serious financial losses. Even equipment maintenance—and longevity— can be negatively impacted by environmental factors, such as the wear and tear on mechanical systems exposed to arid, sandy climates. Legal Risk—Emerging markets rank often have problems with cronyism, which leads to an increased risk of bribery and corruption. In addition to understanding the requirements for sweeping anti-bribery and corruption (ABC) standards set by the Organisation for Economic Co-operation and Development and laws like the US Foreign Corrupt Practices Act (FCPA) and the UK Anti-Bribery Act, many emerging markets are implementing ABC regulations as well. Organisations must also consider risks related to money laundering, terrorist financing, connections to organized crime, criminal activity, and violations of economic and trade sanctions. P E S T L E Adverse and general news from 25,000+ licensed media sources and 12,000+ webnews sources spanning developed and emerging nations including Africa, Asia, Latin America, and the Middle East 3 3 3 3 3 3 Country Risk Databases covering state role in industry; politics, institutions and regulations, foreign trade, operating conditions and practices and more 3 3 3 3 3 3 Company Reports pulling from 400+ databases with coverage of 200+ million public and private companies, spanning 220 countries in developed and emerging markets 3 3 Earlier this year, the New York Times reported that German engineering and electronics giant Siemens disclosed that a Russian customer had diverted two power plant turbines to Crimea instead of their intended destination in southern Russia, despite having agreed to comply with sanctions related to Russia’s annexation of Crimea in 2014.3 A lack of transparency into customers, suppliers and other third parties exposes organisations to significant financial and criminal penalties. L According to NGO China Water Risk, 65 percent of the world’s clothing is manufactured in China, contributing to 17 to 20 percent of industrial water pollution.4 However, in recent years, major clothing brands have faced considerable reputational damage when consumers discovered that poor environmental practices tainted the supply chains. More recently, activism in China has led to the closure of several manufacturing facilities, leading to disrupted supply chains and financial losses. Aggregated Sanctions & Watch Lists from multiple authorities, including domestic and global sanctions, plus nearly 1,200 watch lists originating from more than 80 countries 3 3 Global PEP lists include 1.4 million profiles of PEPs, as well as those of their family members and close associates 3 3 E Decided court cases—civil and criminal—as well as cases from the International Court of Justice, the principal judicial organization of the United Nations 3 3 6 E ME RG I NG MA RK E T S CO NT E NT S HO W CA S E 7

6. Why LexisNexis® For more than 40 years, LexisNexis has been helping companies deliver good profit by enabling them to build and maintain trusted relationships using effective due diligence and ongoing monitoring. Our versatile technology and comprehensive global intelligence support a risk-based approach to identifying, assessing, and mitigating the reputational, financial, regulatory, and strategic risks companies face. With better insights, companies can make informed, data- driven decisions. Discover how LexisNexis can help you address risk in emerging markets Because good profit comes from making the right strategic decisions. Talk to a specialist to learn about our unmatched content collection and technology aligned For more information: to your risk mitigation workflow. LexisNexis.com/Lexis-Diligence @LexisNexisBiz LexisNexis.com/BizBlog 800-628-3612 bis.in@lexisnexis.com [Insert custom call to action here] +91 99100 69136 Endnotes 1 Cordesman, Anthony H. “Instability in the Mena Region, Afghanistan, Pakistan and Key Conflict States: A Comparative Score Card.” CSIS. November 13, 2017. Accessed 11/2017 at https://www.csis.org/analysis/instability-mena-region-afghanistan-pakistan-and-key-conflict-states-comparative-score-card 2 Brito, Debora. “Labor among children aged 5-9 increased in Brazil.” Agencia Brasil. June 12, 2017.Accessed 11/2017 at http://agenciabrasil.ebc.com.br/en/ direitos-humanos/noticia/2017-06/labor-among-children-aged-5-9-increased-brazil 3 Ewing, Jack and Kramer, Andrew E. “Germany’s Siemens Says Russian Partner Violated Crimea Sanctions.” New York Times. July 10, 2017. Accessed 11/2017 at https://www.nytimes.com/2017/07/10/business/energy-environment/siemens-russia-crimea-turbines.html 4 Accessed 11/2017 at http://chinawaterrisk.org/resources/analysis-reviews/the-environmental-cost-of-clothes/ LexisNexis and the Knowledge Burst logo are registered trademarks of RELX Inc. Other products or services may be trademarks or registered trademarks of their respective companies. © 2017 LexisNexis. All rights reserved. 11 10 E ME RG I NG MA RK E T S CO NT E NT S HO W CA S E 8 E ME RG I NG MA RK E T S CO NT E NT S HO W CA S E E ME RG I NG MA RK E T S CO NT E NT S HO W CA S E