COVID-19 & The International Business Expansion Plans: Interview with Lee Quane, Regional Director Asia at ECA International

September 16, 20201:19 pm659 views
COVID-19 & The International Business Expansion Plans: Interview with Lee Quane, Regional Director Asia at ECA International
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COVID-19 has brought global economic instability at varying degrees. Singapore’s government announced that the nation’s economy is expected to shrink to more than 7 percent in 2020. The economic downturn has also affected international business expansion plans. Not only that, many business leaders are expected to make hard decisions when it comes to managing overseas assignees and the overall global and regional movement of talent. 

With this in mind, HR in Asia sits with Lee Quane, Regional Director – Asia at ECA International, to discuss business expansion plans and how to better manage overseas asigness in unprecedented times. 

We have heard a lot about how the recent pandemic has disrupted business operations across global industries. Personally, how does the pandemic affect your career? Do you notice any significant difference in your career between pre- and during the outbreak?

I believe that for many employees working overseas, the pandemic has brought increased feelings of insecurity; insecurity about their employer’s operations in the host location and job prospects in their home location if their assignment overseas is ended prematurely. The nature of the current economic downturn and its impact on people’s ability to see close family and friends in their home countries has also negatively impacted many employees who work outside of their country of origin.

ECA’s Cost of Living reports that COVID-19 has brought instability to expatriate employees. How does this affect business international expansion and the overall global talents?

People working outside of their home countries often have complex situations associated with their financial commitments: while they may work in one country, they may also have ongoing commitments such as housing commitments, family financial commitments and long-term savings commitments elsewhere (most often in their home country). This means that they may often have to allocate their salary towards meeting both financial commitments in the location where they work as well as commitments back home. As such, they will be impacted by currency fluctuations (changes in the value of the currency or currencies in which their salary is paid) and will need to manage these.

The combination of the Covid-19 pandemic and volatility in oil prices has caused much volatility in exchange rates in 2020, with even major currencies such as the US Dollar being affected. To attract employees to live outside of their home country, companies need to ensure that the employee is incentivised to do so. This includes ensuring that the employee feels that they will not be adversely affected by the impact of currency volatility when they choose to work overseas.

For some companies, a business expansion plan into markets of focus is necessary, however, it could create more challenges to companies financially and economically. What are the best ways to mitigate this challenge?

Overseas expansions can be costly and involve risk on the part of companies. There are significant costs associated with expansion into a new territory which include the costs associated with planning and preparation (such as undertaking market research, formulating business plans and estimating the viability of the host market and navigating the regulatory requirements associated with setting up an operation in a new country). Once a decision has been made to enter, there are often costs associated with securing a premise, purchasing the machinery/technology needed to be able to operate and staffing the operation.

Most companies will try and mitigate this risk by testing the waters first, trying and entering a market remotely in the first instance by coordinating expansion from operations based elsewhere. This could involve working with a local partner as an agent or representative in the first instance while the company’s personnel will undertake multiple business trips to see clients and partners. If the company sees potential to set up a more established presence in the host country, it will then do so.

If business leaders want to execute their existing international plans, how should they adjust their plans in response to this pandemic?

The pandemic has made it more difficult for companies to operate internationally. Most economies are in a recession so both businesses and consumers are conservative with their budgets. This makes it difficult for anyone to execute a plan for expansion unless they operate in an industry which has been positively affected by the pandemic. Border restrictions, quarantine requirements and cut-backs to international flights have also made it much more difficult for company personnel to visit a country to evaluate the feasibility of the market. As such, I expect that many companies are shelving their plans and taking a wait-and-see view unless they are fully convinced that their planned expansion will result in an increase in income despite the current situation.

What risk assessments should business leaders fulfil to minimise the negative impact of international assignments?

As travel restrictions begin to ease, organisations should still be mindful of some key considerations regarding business travel.

  • Firstly, an assessment to consider the type of work involved, to ascertain the main risks of exposure and how best to mitigate this.
  • Take into consideration the risk profile of the traveller; age, sex and presence of underlying health conditions – as travellers may have an underlying condition that the company, or travellers themselves, are not aware of.
  • It is important to keep up with government travel advice, along with advice from travel risk consultants, which could have implications for the validity of corporate travel insurance policies.
  • For assignees who are present in the host location, this may also mean re-evaluating existing compensation and benefits packages to mitigate any worries or if changes have not been made, to communicate the reasons why companies have generally not adjusted compensation packages offered to their assignees. Our Global Mobility and Covid-19 policy survey showed that fewer than 10% of the 350+ participating companies provided any increase in cash compensation to staff remaining in their location of assignment, nor did they reduce packages. Rather, companies made efforts to both ensure employee safety (by providing PPE). This shows that companies have placed employee wellbeing at the top of their list of priorities because there is no point in increasing an employee’s compensation if they are working in an unsafe or unhealthy environment. 
  • Companies need to be aware of the mental stress that assignees may be under. For instance, working in a country that they may not be fully familiar with that has implemented significant restrictions on movement and living conditions to manage the Covid-19 outbreak. Companies also need to be considerate of the stress that assignees may experience when they are separated by family who may be vulnerable to the virus. 
As stated, it could be harder for expatriates to manage their emotional, mental, and financial wellbeing. Thus, what could overseas assignees expect from their employers in terms of salary, benefits, and safety?

Companies have already begun to shift their approach to prioritising employee wellbeing, through the provision of personal protective equipment (PPE), rather than employee retention through cash rewards.

Aside from the additional provisions, companies have also recognised that many of their employees who have had to remain in the host location have been unable to utilise their home leave during the pandemic – albeit for health concerns, quarantine restrictions or the inability to travel back to their home location. In light of this, some companies offered to encash this, accepting the fact that employees may not be able to use it during the allocated period. Alternatively, companies have also allowed employees to roll over their remaining leave to next year. Both options have their merits, but any decision should account for the impact that these choices may have on the taxable nature of the benefit.

Overall, ensuring clear and regular communication on the situation and measures being implemented can help provide employees with much-needed mental and emotional reassurance. Being empathetic to the personal circumstances of individuals is also vital in ensuring the workforce remains positive, supported and healthy in difficult times. 

As currency fluctuations can cause businesses to become volatile, how can business leaders protect their overseas assignees from pandemic-related currency fluctuations?

The best way for companies to do this is to deliver the employee’s salary in a mixture of home and host country currencies. This follows on from my response to question #3 above. Once the employee’s assignment salary is calculated, it is split into a portion to be delivered in home country currency and host country currency. The former portion is delivered into the employee’s home country bank account and enables the employee to meet home country commitments. The latter is delivered in the employee’s host country bank account to enable them to meet day to day commitments there. These amounts are fixed so the employee is therefore protected against the impact of currency volatility during the assignment.

What are your thoughts on business-related travel outlook in the post-pandemic?

The frequency with which employees undertake business travel is likely to reduce as a result of the pandemic. Companies have adapted their working practices and have proven themselves to be able to conduct cross-border business using alternative methods.

However, business travel remains an essential element of an organisation’s international operations. The resumption of cross-border mobility is a positive sign for organisations that rely on business travel as it signals a recovery in the global economy.

Many companies are still planning new assignments for when global travel restrictions are lifted, and many countries around the world have already begun the process of reopening. However, organisations must be wary of the new challenges associated with travelling such as reduced frequency of flights, longer wait times at customs and immigration, health screenings and potential quarantine requirements both upon arrival in the host location and upon return.  

With global travel still far from returning to normal, shorter and easier to initiate assignment types are most likely to have been postponed indefinitely. When we polled companies in June, most companies expected a return to pre-pandemic levels of assignments within 12 months. However, this is likely to be optimistic and a return to pre-pandemic levels of employee mobility will be dependent on the creation of a vaccine or the eradication of the virus.

In addition to travel restrictions, a need to cut costs will undoubtedly reduce mobility further. The main exception to this is virtual assignments, where assignees carry out their role remotely from the home country. This type of assignment would be largely free from travel restrictions and could prove significantly cheaper than other assignment types, although it would be subject to practical limitations of working across time zones, as well as the tax and immigration issues mentioned previously.

Read also: Leadership and HR in The Digital Age: Q&A with Cheri Alexander, Faculty Member at the University of Michigan, Ross School of Business

Lee Quane, Regional Director Asia at ECA International

About Lee Quane: 

Quane began his career with ECA International in 2003 and has been assisting multiple companies in managing and rewarding their international staff effectively for over 14 years. Apart from assisting and working on international staff, Quane also invests in data and software as he believes that businesses should leverage technology as a means to ensure talent and mobility strategies are not operated in silos.

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