Regulation and legal risks are the most pressing concerns for Latin America’s technology, media and telecommunications (TMT) businesses.
In research for Willis Towers Watson’s TMT Risk Index 2016, the three greatest risks all fall within the megatrend of regulation and legal risk:
- data protection fines and penalties
- intellectual property (IP) and patent breaches
- competition and antitrust law scrutiny associated with M&A activity
Latin American firms, along with their peers globally, rank data protection fines and penalties as the greatest risk they face. But IP and patent breaches are the second-greatest concern for firms in the region, highlighting an important variation between TMT in Latin America and other parts of the world.
In Latin America, IP and patent risks reflect cultural issues as well as legal differences. With few exceptions, the regulatory and legal regime is not as mature as in North America, Europe or Japan and Korea.
Latin American countries are moving towards stricter regulation, including through trade deals. But there is still some way to go before companies operating in the region enjoy the comparable protection as those in other markets.
Even if businesses draft strong contracts with retailers or distributors, they will still have to work with local laws if there is a breach – and those local laws may not be as robust as the international legislation with which TMT firms are familiar.
As well as a lack of robust legislation, enforcement also poses a challenge. Again, this is an area where cultural factors play a part. Law enforcement agencies and courts may not always prioritise patent or IP breach cases. Officials may favour local over international legislation, even when the local firm stands accused of piracy.
Even if a TMT firm wins a case, it might not win damages; if it does win damages it can be hard to ensure they are paid. And, by that stage, most of the harm is already done.
For TMT companies, this can make doing business in the region problematic. In the survey, firms report that the difficulty of managing IP and patent breaches exceeds their impact. But firms can take steps to reduce the risk.
Companies need to be proactive on compliance, as well as on employee recruitment and monitoring. And businesses in the region should be clear about the assets they are looking to protect when it comes to designing their IP and data controls. These steps will help reduce losses while regulation catches up.
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