GLOBAL CRISIS MANAGEMENT AND COMPLIANCE STRATEGIES FOR BUSINESS CONTINUITY IN CROSS-BORDER TRANSACTIONS

ABSTRACT

This topic provides a multifaceted analysis of the issues of crisis management and business continuity in the context of cross-border transactions. The relevance of the topic is driven by the increasing volatility of the geopolitical environment and the tightening of regulatory regimes, which threaten the successful completion of international commercial operations. The objective of this article is to identify and systematize specific risks, as well as to characterize practical methods for their prevention and mitigation (in a strategic context). The main contradiction in the scientific literature is the gap between existing academic models and the actual challenges faced by businesses. Most research has focused on traditional financial and operational risks, while authors have not given due attention to the mechanisms of deal failures caused by sudden regulatory barriers and sanctions pressure. The study concludes that the key success factor is an integrative approach that combines thorough legal, financial, and, most importantly, geopolitical analysis. The importance of a comprehensive methodology is substantiated, which includes not only standard Due Diligence procedures but also a deep analysis of sanctions regimes, currency restrictions, and regional legislation. The materials are addressed to specialists focused on enhancing business resilience and minimizing losses in the face of global uncertainty.

АННОТАЦИЯ

Ключевые слова: антикризисное управление, валютные ограничения, геополитические риски, непрерывность бизнеса, санкции, трансграничные сделки.

Introduction

Against the backdrop of increasing geopolitical turbulence, the fragmentation of the global economic space, and the tightening of sanctions regimes, the execution of cross-border transactions is losing its predictability, and their successful completion is associated with critical risks that were previously not so apparent. Classical approaches to crisis management, which focus mainly on internal operational and financial problems, as well as traditional methodologies for assessing risk factors in mergers and acquisitions (M&A), are proving ineffective in the face of unconventional threats, particularly: the extraterritorial application of legislation, currency restrictions, and sovereign legal barriers.

The essence of the problem lies in the absence of a comprehensive, interdisciplinary methodology that helps to integrate legal, financial, and strategic tools for the preventive identification and neutralization of risks that could lead to the failure of a transaction. The modern business environment requires a fundamentally new approach that takes into account the dynamics of international relations and their direct impact on private law transactions.

In connection with the above, the development of a system of preventive measures and practical recommendations that allow for ensuring the continuity of business processes and the successful completion of cross-border transactions in the reality of financial and regulatory constraints is of great importance.

Materials and Methods

The publications studied in the preparation of this article can be appropriately grouped into several key thematic blocks.

The first group of sources focuses on the fundamental issues of risk management and business continuity. The works of M.G. Ma, M. Waszkiewicz [7, рр.989-998], A. Saflow, and colleagues [9, рр.12-21] describe theoretical approaches to crisis management, emphasize the role of professionals in project management, and consider modern strategies that influence the planning of anti-crisis measures. S.V. Chernovalenko [2] and V.V. Pankratyev [8] detail the practical aspects, offering specific policies and methods of corporate security to maintain the stability of operational activities. The second block is dedicated to the specific risks of cross-border transactions. K. Huang [5, рр.11-13] explores risk management strategies in supply chains, while Y. Chen [1] focuses on the financial and compliance risks that arise in mergers and acquisitions. A separate category of publications addresses regulatory barriers and their impact on international business relations. The publications of H. Han, T. Lukoianova, S. Zhao, and others [4] contain a description of the relationship between international relations and business research. The fourth block includes practical tools and case studies [6, 10], and a list of key questions considered during a Due Diligence Checklist [3], which is a basic tool for risk reduction.

In reviewing the literature, it was found that many authors focus on describing theoretical models and individual aspects of risk management. The principles of ensuring business continuity are detailed [2, 7, рр.989-998;  9, рр.12-21], and approaches to risk management in a corporate environment are proposed [1, 8]. However, a number of contradictions and gaps are observed in the publications. In particular, there is a gap between academic theories and real practice—often, the specifics of sudden geopolitical "shocks" and regulatory restrictions, which cannot be predicted using traditional models, are not taken into account. The main gap in the sources is the weak coverage of comprehensive methods for preventing deal failures caused by unpredictable and non-market factors (sanctions, currency restrictions, sudden changes in legislation). The authors of [1, 5, рр.11-13] only touch upon these issues briefly, focusing on more traditional risks. There is no single, universal algorithm or checklist for geopolitical Due Diligence that would allow for the systematization of risk factor assessment in transactions with counterparties from jurisdictions with high political instability.

The following methods were used in the preparation of this article: content analysis (study of scientific publications, analytical reports, official documents), comparison, case studies, systematization (to structure information), and generalization and synthesis (to form a holistic picture of the problem and formulate recommendations).

Results and Discussion

Crisis management is a specific management system aimed at developing and implementing economically justified measures to reduce the negative impact of risks. In its traditional sense, it is a project with a clear goal and a strategy to achieve it. Historically, several models of this process have emerged. One of them describes crisis management as a sequence of five main stages (Fig. 1). However, in modern conditions, this model appears simplistic. A more detailed approach, presented as a nine-step process, demonstrates that crisis management is not only a reaction to a crisis but also its prevention. It all begins with monitoring warning signals, followed by preventive measures to neutralize early symptoms. If prevention fails, the company moves on to identifying the parameters of the crisis, investigating its causes, assessing opportunities, choosing stabilization methods, and then developing and implementing a full-fledged anti-crisis strategy. The final steps include monitoring and eliminating the negative consequences [7, рр.989-998;  9, рр.12-21].

Figure 1. Stages of implementing anti-crisis management, strategic framework (based on [7, рр.989-998;  9, рр.12-21])

An analysis of the described approaches allows the author to conclude that the two models do not contradict each other but represent different levels of the same process. The five-stage model is a strategic "framework" that sets general guidelines, while the nine-step approach acts as a detailed tactical plan through which operational implementation is ensured.

A business continuity system is an integral element of corporate governance aimed at maintaining the company's operational stability in the face of unforeseen incidents. The key principles are minimizing downtime, shortening the recovery period, and retaining the loyalty of customers and suppliers.

The PDCA ("Plan-Do-Check-Act") model is often used to implement these guiding principles. This methodology includes the following components (Table 1):

Table 1.

Elements of the PDCA model (based on [1, 2, 4])

The business continuity system is closely related to crisis management, essentially being its proactive and preventive part. An effective strategy is not only a plan for a negative scenario but also measures that make it unlikely.

The typology of risks in cross-border transactions typically includes the following categories:

• Financial (related to currency fluctuations, restrictions on capital movement, payment problems, the threat of secondary sanctions);
• Regulatory (caused by differences in legislation, export controls, antitrust regulation, new data localization requirements);
• Operational (arising from changes in the supply chain, change of counterparties, logistics problems);
• Legal (including threats associated with litigation, protection of intellectual property, applicable law);
• Political (related to sovereign interference, freezing of assets, sudden changes in legislation dictated by the geopolitical context) [8].

All the risk factors mentioned above are interconnected and have a multiplicative character. The inability to manage one of them often provokes a chain reaction that leads to the failure of the entire transaction.

One of the most indicative examples of a deal failure due to regulatory barriers is the case of Visa Inc. and Plaid Inc. In 2021, the U.S. Department of Justice filed a civil antitrust lawsuit to block the $5.3 billion merger. Visa was accused of having a monopoly in the online debit card space, while Plaid, in turn, was described as a "nascent competitor" developing an innovative, cheaper payment platform. The Department of Justice argued that the acquisition of Plaid would allow Visa to eliminate a competitive threat before Plaid could succeed. This case is unique in that the deal was thwarted not because of current violations, but because of a potential threat to competition. According to the Department of Justice, Visa's CEO viewed the deal as an "insurance policy" to protect the business. This demonstrates that regulatory barriers can be based on futuristic concepts and forecasts, making them extremely difficult to predict within the framework of traditional Due Diligence. Such actions by a regulator underscore the need for a deep analysis of the market and the strategic intentions of regulatory bodies, which goes beyond standard checks [6, 10].

Traditional Due Diligence, which includes financial, legal, tax, and operational checks, is no longer a sufficient tool for assessing risks in cross-border transactions. For full protection against modern challenges, its scope must be significantly expanded to include the analysis of new types of risks. Due Diligence in modern conditions is not a one-time procedure before a deal but is becoming a dynamic, continuous process. This is a shift in focus from verifying "what is" to forecasting "what will be." The corresponding checklist is presented below (Table 2).

Table 2.

Extended Due Diligence Checklist for a Cross-Border Transaction (based on [3])

Competent contractual structuring is a key tool for hedging risks. General wording, for example, regarding force majeure, is often insufficient in the face of modern challenges. According to the UNIDROIT Principles, a party is exempt from liability if non-performance was caused by an impediment beyond its control. However, this requires proof. Effective protection requires customized clauses that are tied to specific risks (lack of components or legislative prohibitions). It is important to provide in advance for the possibility of amending the contract when raw materials are replaced or suspending its effect without penalties in the event of a significant change in circumstances [4, 5, рр.11-13].

Another critical measure is thorough verification procedures for counterparties. Against the backdrop of a changing circle of intermediaries, the risk of working with "fly-by-night" firms increases. Checking constituent documents and the presence of branches or property abroad all become vitally necessary. It is also recommended to obtain guarantees and representations from the manufacturer itself, not from an intermediary, which helps to avoid evasion of responsibility.

The correct choice of a dispute resolution mechanism appears to be the most powerful tool for hedging the risks of a deal failure due to political pressure. International arbitration is an effective alternative to state courts, offering flexibility, confidentiality, and the universality of decisions. It is advisable to highlight the basic advantages of arbitration: flexibility—the parties can independently choose arbitrators, the language, and the place of the proceedings; confidentiality—the processes are closed to the public, which helps to protect commercial secrets; neutrality—arbitration allows for avoiding the possible bias of national courts; enforceability of awards (thanks to the 1958 New York Convention, arbitral awards are recognized and enforced in more than 170 countries, which is significantly broader than the coverage of bilateral agreements for state courts).

Conclusion

Traditional approaches to crisis management and Due Diligence are no longer able to ensure the success of cross-border transactions against the backdrop of increasing geopolitical turbulence. The implementation of a comprehensive, proactive methodology is required. The key conclusions obtained from the analysis can be summarized as follows:

• the successful completion of a transaction depends on the company's ability to foresee and mitigate both obvious and hidden risks that arise at the intersection of law, economics, and politics;
• financial and regulatory barriers, initially created to ensure control, in practice sometimes create new systemic challenges that require unconventional approaches to overcome them;
• traditional Due Diligence is insufficient and must be expanded to include IT, geopolitical, and compliance analyses. The process should be made dynamic and continuous, not a one-time event;
• contractual structuring, in particular, the customization of force majeure clauses, as well as thorough verification of counterparties, are critically important hedging tools;
• the choice of international arbitration with a neutral jurisdiction serves as a powerful strategic decision that helps to ensure the enforceability of agreements and to mitigate the risks of political interference.

Based on the conclusions formulated, it is advisable to present the author's recommendations to market participants:

• integrate into the corporate strategy a mechanism of constant "horizon scanning" to monitor geopolitical and regulatory changes;
• involve interdisciplinary teams of experts (lawyers, financiers, strategists, IT specialists) to conduct an expanded Due Diligence;
• work through contractual clauses in detail, tying them to specific risks that are characteristic of the current geopolitical context;
• when choosing a jurisdiction for dispute resolution, give preference to neutral arbitral institutions with an impeccable reputation and independence.

It appears that in the future, cross-border transactions will increasingly depend on the ability of companies to integrate the analysis of geopolitical and regulatory risks into their strategy. Success will accompany those who are ready for constant adaptation, turning potential obstacles into manageable variables.