The PERILS of Managing OVERSEAS.

• Author: Sweeney, Paul
• Position: Statistical Data Included

You may have seen have seen the television commercial. A gaggle of employees at a New Economy company is partying on a yacht in San Francisco Bay, celebrating a multimillion-dollar financing. Then the CEO informs them that the company has just 30 days to expand into Singapore and Hong Kong. The announcement is met with dead silence as a female voice intones: "That's when you know you are so ready for IBM."

It's a catchy ad. But to Paul Regan, a forensic accountant at Hemming Morse in San Francisco who has been investigating white-collar crime and corporate scandals going back to Howard Hughes' will in the 1970s, IBM's hypothetical example eerily mirrors real business situations, which can be fraught with peril. "It's not necessarily bad in every instance," he says of a new company's need to ramp up overseas' operations quickly. "But it's possible that the company will be stretched thin and focused on meeting a short-term deadline and not on setting up a structure with sound management controls."

In an era of increasing globalization, more and more companies are discovering that, to be successful, they must take their act abroad. The U.S. Department of Commerce reports that 205,188 U.S.-based companies were exporting merchandise in 1998, the most recent year for which it has figures, up 82 percent since 1992.

In venturing abroad, however, companies are not only encountering unfamiliar territory -- different languages, currencies, diet, dress, religious practices and social customs -- but they are entering areas where laws, traditions and ethical standards could conflict with the company's own. What's more, sheer geographical distance from home may complicate matters and diminish transparency, providing a perfect environment for rogue managers bent on concocting scams or carrying on fraud.

Forensic accountants and security experts say that, in addition to the challenge of operating an unwieldy, far-flung enterprise, management at global companies must be on guard against fraud and embezzlement, money-laundering, accounting shenanigans, political corruption, bribery and other illicit activity. White-collar crime is also made easier when face-to-face transactions give way to faxes, electronic mail, mobile telephones, teleconferences, laptops, beepers, overnight mail delivery and courier services.

"There is more exposure to fraud with globalization of the economy, advanced informational systems and the reliance on computers," warns Kenneth Zignorski, a managing director at Mercer Management Consulting. "Firms are conducting commerce on a 24-7 basis and, when business is going on around the clock, there is more opportunity for fraud."

Robert Preston, a senior vice president at Deloitte & Touche based in Edmonton, Alberta, says it is not uncommon today for companies to know very little about their...