UK: Local Compliance In Global Business - A Journey Through A Changing Landscape

Last Updated: 17 November 2011
Article by Richard Cantor and David Lewis


Global businesses are increasingly migrating their finance functions to regional hubs or shared service centres, either through in-house or outsourced operations. This is driven by the need to cut cost, streamline processes and maintain central control. For many with established service centres, the question is 'What functions can we centralise next?'

In a centralised business model, global companies still need to comply with a multiplicity of local regulations, for example in the areas of tax returns, local accounts filing, company secretarial and payroll. Challenges of scale and the need for local knowledge in these areas are often the most significant barriers to delivering a truly centralised finance function.As one of our clients has said to us – 'It's hard to find Peruvian GAAP knowledge in Bangalore'.

BDO has conducted a study to examine the different models that companies have adopted as they centralise, to ensure compliance with local regulatory requirements. The study combined face to face interviews with desk research and culminated in a discussion and debate among the participants.

This report contains a summary of the key findings and a description of the four models identified. A full presentation of the results is available from Richard Cantor or David Lewis at BDO whose contact details can be found on the back page. This presentation includes additional material such as the participants' vision of the future, challenges to overcome and an analysis of their opinions on escalation issues.


This report is based on a study conducted via interviews with senior

finance executives from major global companies, including AT&T, BT and Vodafone; Dell, Logica and Microsoft; BAe, Rolls Royce and Unilever. The interviews were held during the first half of 2008 and a full list of participating companies is included.

Participants included:

  • CFOs and global or regional finance leaders
  • Heads of global or regional shared service centres (SSC)
  • Global and regional heads of tax
  • Company secretaries and heads of legal compliance and governance functions.

Two thirds of our participating companies are from the technology and telecoms sectors. Others are drawn from the manufacturing and service sectors.

Participant companies in the study collectively have global sales of US$550bn with an average of $24bn

The various corporate activities of our participants span the globe and this is one of the key reasons that this study is relevant to all finance functions aiming to meet the commercial demands of the 21st century.

With more and more business activities becoming globalised, this study looks at the transition of finance functions as they adapt to meet their strategic objectives. It highlights the challenges they face on the way as they seek to optimise their operations globally yet maintain compliance with local regulations.


  • Without exception, participants have embarked on a 'journey' to transform their finance functions.
  • There is no clear 'one size fits all' roadmap as to how to get there.
  • Ten years ago, as their corporate responsibilities grew and broadened globally, most of our participants would have followed the traditional finance model of essentially replicating the same functions in each country under a local FD. None of the companies in our study still follow this model.
  • The starting points of their transformational journies may be very different, but the drivers for change are common and there are similarities in the paths being taken and in the destination.
  • Most companies are at some stage of development of a shared service centre strategy. This takes the bulk of the finance function out of the local countries and into a central location (which can be in-house or outsourced, and often in low cost areas). However, this streamlining of operations creates issues with compliance.
  • Compliance is never a driver for change and is rarely a primary consideration. However, if compliance is not addressed, it can present significant risks and prevent the maximisation of transformational gains.
  • Ambitious, rapidly expanding companies tend to use outsourced support to gain localised efficiency and expertise.
  • We identified four models that companies are using for local compliance. Of these, centrally coordinated outsourcing with local service delivery was seen to be the most attractive model but not the model most in use.
  • Future convergence of accounting and taxation standards is unlikely to remove the need for local expertise.
  • Technology will play an increasing role in improving the efficiency of local compliance.

We found a clear direction in the journey from fragmented and localised towards standard and global. Companies with 'multinational' characteristics such as local products, geographic reporting lines and local autonomy, or those with a history of growth through major acquisition, have a different starting point from more 'global' companies – those with standard global products, central control and functional reporting lines – and those with a history of mainly organic growth. Companies with more of the latter characteristics are likely to be further along the path to globalising financial processes.


Advances in IT and telecommunications technology have turned the business world into a competitive global village, driven by the need to reduce costs, streamline processes and maintain strong control.

Efficient standardised processing is seen as a way to achieve cost reductions and, centralisation of accounting process is seen as a way of improving control and minimising corporate risk.

However, the key driver for the reshaping of finance functions appears to create a better overall service provider, internally and externally, and add more value to the business.

Whether finance functions are insourced or outsourced they are now aiming to serve their businesses better – reducing running costs, meeting service level agreements, maintaining compliance and freeing the decision support functions from routine activities.

Is the journey really necessary?

No-one is forcing anyone to transform their finance function but participants have found there are compelling commercial reasons for doing so.

Globalisation is here to stay: Now that the opportunities of international telecommunications and worldwide web connectivity have been released there is no going back to geographical national markets and parochial corporate bodies. Markets today are led by global brands and the companies operating within those markets are highly complex international entities.

Lean business is good business – Controlling costs and efficiency are keys to the bottom line success of 21st century business. Administrative 'back office' activities within finance functions are under the spotlight just as much as revenue generating areas.

Regulation and Litigation – The world in general has become more litigious and the business world more accountable, wherever it operates. The experiences of Enron,WorldCom and others stand as a trenchant reminder and the Sarbanes Oxley Act demonstrates a fresh will to instil regulation into corporate processes worldwide with the need for well documented and controlled processes.

It's expected of you! – Corporate image is not just external and focussed on consumers. Professional efficiency is expected at all times, in all areas. Not only are there 'internal customers' to satisfy but alliance partners will expect assurance, if not demand verification, of trouble free finance functions.

The Role of IT

The emergence of global ERP systems, enabled by high bandwidth telecommunications has made the transformation journey possible. At the same time, the cost of ERP implementation in smaller countries can create a barrier to complete global roll-out.


Local compliance isn't a strategic issue, but it can be an irritating operational problem – the sore toe that can cause a giant to stumble.

In some countries, errors or lateness in compliance can go beyond mere penalties and lead to the closure of commercial operations.

Local compliance is necessary but was not ranked a priority by our study group, and accordingly performance levels can vary dramatically, affecting corporate cost-effectiveness and process efficiency.

Our study highlighted four areas of concern:

Poor process performance

  • Lack of service level agreements (SLAs)
  • Fragmented responsibility (i.e. separate reporting lines for tax, finance and legal)
  • Infrequent compliance processes leading to a patchwork of providers and little coordination.

Problems with operational scale

  • A great variety of local regulation
  • Language issues
  • Low transaction volumes render the use of a large outsourcer or shared service centre (SSC) uneconomic
  • Standardisation through Enterprise Resource Planning (ERP) systems may not be feasible.

People issues

  • Limited local career progression opportunities for staff
  • Lack of holiday or sickness cover
  • Safeguarding local knowledge when key staff leave/retire
  • Staff retention – beware of 'poachers'!

Market challenges

  • Finding suitable single providers eg payroll
  • New contract wins in new countries require rapid response from finance function
  • Continuity and co-ordination with existing structures and systems to help maintain overall corporate performance.


The clear directional trend shown by our study participants is away from the traditional finance model reporting vertically in a hierarchical manner towards a flatter globalised structure. There is a move away from fragmented regional and local functions towards standardized processes and/or outsourced processes to specialists.

We have identified four models that companies are using to meet their local compliance obligations.

Model 1 In-house, in-country

This is a typical model in a traditional business that does not have shared service centres. It is also often the starting point of a company's transformational journey.

A common first move is to introduce a shared service centre for basic accounting activities such as transaction processing, but harder activities such as compliance and payroll are still undertaken locally in each country.

A variant of this model is country clusters where one country will also look after the finance functions for the neighbouring country, for example in Eastern Europe or in Africa or Middle East.


  • Suits organisations with large operations in each country eg manufacturing
  • Local knowledge under control of local entity


  • Difficult to maintain in combination with a shared service centre
  • Limited career progression
  • Cover for staff absences


Model 2 Local outsourcing

In this model, the parent headquarters requires each country or regional operation to employ a suitable local accounting firm to undertake the bookkeeping and/or local compliance work.

This model is often used when companies are first moving into new territories and is currently used by some of our participants, particularly in their smaller countries.

The advantages are that it assists continuity, and provides time to consider 'the bigger picture' and any improvements that might be introduced.


  • Low cost outsourcing solution
  • Reduces dependency on a single individual


  • No central coordination
  • Multiple points of contact
  • No escalation if service is poor
  • Lower visibility and control
  • High time demand on company management


Model 3 Centralised outsourcing, central delivery

This model depends upon personal expertise and/or specialist software.

The first option is to employ a foreign national expert within the shared service centre, which works with the larger countries, while the expert handles the specific requirements of their country.

One of our study respondents with a tax service centre in London employs French, Scandinavian, German and Italian experts in London for their local country knowledge and language skills.

The weakness lies in human preference.Will the professional expert want to uproot to live and work where the SSC operates?

The second approach is to try and develop local software that automates the local compliance processes and creates filings automatically from data in the system.

Advances have been made in this software technology, particularly for VAT processing, but the weakness is that if there are input mistakes with the raw data, then there will be mistakes in the filing.

An expert professional eye will still be required to oversee the process in order to get satisfactory local sign-off. And local professionals are still needed to deal with audits and queries from the authorities.

Move the people – employ foreign specialists located at SSC


  • Can be cost effective for larger countries


  • Less suitable for smaller countries with one or less full-time role
  • Must be desirable SSC location
  • Risk of disruption through staff turnover

Automate – develop software for local processes to run from SSC or processing centre


  • Technology provides cost efficiency where scalable


  • Rubbish in, rubbish out – lose sense checks by local experts
  • No local presence for local authority audits
  • Changes in local regulation


Model 4 Central outsourcing, local delivery

The best of both worlds – and a model recommended and delivered by BDO International.

Services in each country are delivered by outsourced local accounting and tax professionals who know the local regulations and speak the language.

Operations are centrally managed between the designated point of contact at the parent headquarters and the agreed central point of contact at the global accounting firm.


  • Local service delivery and local presence
  • Global visibility for local compliance issues when needed
  • Central coordination reduces management time
  • Defined escalation path


  • Few firms offer full service and global cover
  • complaints about extra fees from some big-4 service providers

HYBRID MODELS 'A journey through a changing landscape'

Our study plainly indicated the direction in which most companies are heading – towards greater centralisation and streamlining of operations – but it also revealed that there is no clear 'one size fits all' roadmap as to how to get there.

The truth is, this journey to transform the finance function has no set destination and may never end. To remain competitive, as the world changes and new markets evolve, companies must modernise and adapt, and with them their finance functions. It is a continuing journey of professional necessity.

By nature the journey will involve transition between models and the tailoring of models to suit individual corporate needs and parameters. Hybrid models merely reflect the continually changing nature of our business world, and many companies operate different models for different parts of their business.

Typically, in the largest countries, transaction processing functions will be in a shared service centre or outsourced, and the compliance functions will tend to be carried out in-house.

In smaller countries, too small to have the ERP system installed, the transactional functions are likely to be either 'in-house in-country' or 'locally outsourced'. Compliance functions may be done in 'country clusters' or again 'locally outsourced'.

On the right is an example of a US company that uses two different models in Europe. The European shared service centre handles transactions which cover all of the larger countries, while the smaller countries have moved from a 'local outsourcing'model to a 'central outsourcing, local delivery'model, using the BDO offices in each country.


Addressing the problems

  • Compliance issues tend not to be on the strategic roadmap but perhaps they should be.
  • The division of responsibility between finance, tax and legal functions means that local compliance is rarely addressed as a single issue.
  • As more and more is standardised and fewer finance staff are located in-country, local regulatory requirements will act as an increasing barrier to change if the issues are not addressed sooner rather than later.
  • Managed service providers are increasingly entering multiple new countries through the award of a single contract.

Possible solutions

  • Consider developing clear processes for regulatory compliance. Use the same rigour applied to 'in scope' activities for SOX.
  • Use web based tools to track compliance and progress with the processes needed to ensure compliance.
  • Introduce clear service level agreements between finance, tax and legal functions.
  • If you outsource your compliance functions apply the same rigour that you apply to other aspects of your business: look for suppliers with global reach, adopt a common framework and reduce your number of suppliers.
  • Managed service providers should have a compliance roadmap, possibly in alliance with an outside provider, which they can build into their proposals and be ready to execute on contract closure.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.