For the good of society – [inlinetweet prefix=”@mgriffin_uk” tweeter=”@mgriffin_uk” suffix=”null”]18 leadership lessons from organised crime[/inlinetweet]
In Part 1, “Ambition” we set the scene.
According to Interpol, the UN and WTO the organised crime industry is one of the worlds largest with quantifiable revenues of at least $3 Trillion per year and despite trillions of dollars worth of investment to counter act their growth the industry is growing faster than ever leaving a trail of devastation in its wake.
In a world first we reveal how Syndicates, some of whose annual revenues top $200 Billion use influence, resources, technology and vision to build global empires and translate it into a business language that philanthropists can use to build prosperous companies that can help repair some of the societal damage by creating new jobs, simplifying international expansion, building engaged workforces and creating new, selfless collaborative cultures.
During our investigation we uncovered 18 categories, to read them just click on the link below:
- Customer Service
- Bribery and Corruption
- Devolved decision making
- External Problem Resolution
- Internal Problem Resolution
- Local Touch
- The Lean Team
- Disruptive Innovation
- The Flight to Favourable Jurisdictions
- React to Real Time Events
- Process as the Enemy
- Spying on the Competition
- Emigres Clusters
- Trust, Faith and Openness
(13) The Flight to Favourable Jurisdictions
What this means to the Shadow Industry
Many of us are familiar with Benjamin Franklins quote “The only thing that is certain in life are death and taxes” but if you work for a syndicate then only death is certain.
If the shadow industry operated within the law then we would call it legitimate business but it doesn’t so it isn’t. While the shadow industry’s purposeful disregard for the law enables it to go after any opportunity it sees fit to pursue it also creates their largest barrier to growth because it creates a competitor like no other, ones that are supported by trillions of dollars of long tail investment and ones that have been created with the sole purpose of disrupting their operations and putting them out of business. We are of course referring to none other than the law enforcement agencies.
The shadow industry has always been adept at evading law enforcement but today, and leveraging the distributed power of the internet they have gone one step further. Today internet scams bring in more than $1 Trillion in revenues for the shadow industry and while the actors involved work hard to protect their identities more and more of them are operating out of Third World, Communist or Eastern Block countries like Somalia, China or Kazakhstan – not because they’re nationals of those countries but because those countries have weaker computer crime laws that they can exploit and no extradition treaties with the likes of the US or UK. Over the years the shadow industry has become increasingly adept at moving their base of operations from country to country to take advantage of more favorable legislation so in many cases even if law enforcement agencies could identify them they couldn’t arrest them.
What this means to legitimate industries
In the US alone according to the Regulatory Affairs Committee there are over 730 regulations, with another 3,503 in the pipeline that directly affect an organisations capability to operate and while the cost and organisational impact of complying with all of these regulations is always in debate the fact remains that ensuring regulatory compliance dramatically decreases an organisations profitability, attractiveness, flexibility and agility. Consequently it’s unsurprising that upstream supplier organisations are continually engaged in a game of Jiu Jitsu with the authorities trying to find loop holes to exploit, meanwhile their downstream customers, such as those in the Aerospace and Defence industry are motivated to actively seek out and work with less stringently regulated supply chain partners such as those in Europe.
While there are many wide ranging regulations, affecting every industry Sarbanes Oxley, introduced in 2002 is one of the most noticeable and arguably one of the most restricting. In 2012 the Securities and Exchange Commission estimated that publicly traded firms spend over $2 Million annually in direct costs complying with SOX but also concluded that those costs pale in comparison to the soft costs that organisations have to absorb to implement, monitor and manage it. Meanwhile erstwhile research by institutes such as the University of Rochester and Protiviti reveal that since its inception SOX has not only had a direct role in reducing the effectiveness of America’s capital markets and reduced shareholder wealth by around $1.4 Trillion but that 64% of organisations with a market cap of over $1 Billion believe that the cost to ‘Corporate America’ have outweighed the benefits so we can see that legislation can have a tangible impact on your organisations bottom line.
Every organisation wants to maximise profits so just as we have seen with the shadow industry legitimate businesses are also adept at navigating local laws to their advantage. In 2012 it was estimated that corporate tax avoidance cost the UK Treasury over £5 Billion and organisations including Amazon, Apple, Google, Starbucks and Vodafone have been routinely summoned to appear in front of MP’s to explain their “immoral use of secretive jurisdictions, royalties and complex organisational structures to avoid paying taxes” on British profits. These accounting arrangements might be described as immoral but they are common practice, lucrative and highly profitable and in 2013 the US Government estimated that US organisations alone are holding over $2 trillion worth of untaxed profits booked as offshore income in holding accounts outside of their jurisdiction and as for the gambling industry well let’s not open that can of worms…
Laws and Compliance regulations exist for a reason and should always be obeyed but organisations can navigate the differences between jurisdictions to their advantage.
The key takeaways are:
- Create an organisational structure that leverages laws for business advantage
- Optimise your legal framework and governance programs
- Act morally and ethically