Geographic Risks and Rewards: Using Expert Networks in Emerging Markets

Emerging markets and developing economies contributed approximately 60% of global GDP growth in 2024, measured in purchasing power parity terms, according to the World Bank.

Naturally, this suggests that expert networks are also expanding fairly quickly in these regions, as there is a pressing need for:

1. Insights into supply chains for investors
2. Corporations requiring clarity on regulatory changes
3. Access to consumer behavior in markets that are not exactly overflowing in reliable data.

The difference between good information and bad information in these contexts will be measured in hundreds of millions of dollars.

But the expert network model works differently here than it does in developed markets.

• In London or New York, you're validating hypotheses.
• In Lagos or Jakarta, you're often building the hypothesis from scratch.

They are fundamentally different types of work, and it requires a fundamentally different approach to sourcing.

Let’s take a closer look at what this approach looks like.

The Growth Engine

Emerging markets now represent about 40% of global trade and foreign direct investment, with this number having grown steadily since 2010.

UNCTAD's 2023 World Investment Report documented this in granular detail, and the OECD Development Centre has detected the same pattern across its regional analyses.

On the other hand, the expert networks market is experiencing explosive growth of approximately 16-18% annually, with Asia-Pacific being the fastest-growing region, with particular demand within the technology, telecom, and infrastructure sectors.

The IMF's 2024 Regional Economic Outlook provides a closer analysis of some of the key sector-specific dynamics currently playing out in these regions, for example:

• Southeast Asian manufacturing and electronics exports
• The resource sectors in sub-Saharan Africa (oil, gas, mining)
• The emerging fintech and the growth of renewable energy alongside the transition of critical mineral production in Latin America.

Each of these generates demand for specialized local knowledge that simply doesn't exist in standard market research.

The Data Gap

As already mentioned, many frontier economies lack reliable macroeconomic or corporate data.

Research from the World Bank and regional development institutions suggests that there are substantial transparency gaps in emerging markets, which are particularly relevant when it comes to GDP forecasts and corporate financial reporting.

However, these gaps extend significantly beyond simple corruption metrics and indicate fundamental issues relating to statistical capacity and data collection infrastructure in emerging markets.

Financial statements are often inconsistent, and sector data is incomplete or fragmented, while government statistics are often delayed, are frequently revised, and can sometimes contradict each other entirely.

From a practical viewpoint, this could lead to standard due diligence processes failing.

We should also underline the fact that there are cultural and linguistic barriers that could get in the way.

In terms of elaborating on regulations, there's often a great deal of context and certain implications that become lost in translation.

There can be a significant discrepancy between what is said and what is understood, and sometimes this nuance can play a vital role.

Regulatory instability can substantially add to these headaches.

Legal frameworks can change overnight, and enforcement is another important issue that has to be taken into account.

Naturally, this instability can vary widely by region and agency and, unfortunately, is sometimes not always consistent even within a single agency.

Research on regulatory fragmentation indicates that when multiple agencies oversee a single issue, problems arise predominantly from the inconsistencies between them rather than simple duplication.

So you end up with rules that exist on paper but are applied according to completely different standards depending on which regulator happens to have jurisdiction. This is basically a shadow regulatory system that runs right alongside the official one.

Building a Resilient Expert Mix

What does effective risk mitigation look like in this context?

Basically, it involves diversification. Not exactly groundbreaking, but it works.

Consider spreading your expert pool across regions to avoid being too dependent on any single country.

For instance, if your India network goes quiet during an election cycle, it’s prudent to explore backup options in neighboring markets.

• Political contingency planning sounds like an abstract concept until you actually need it.

Developing economies are fairly prone to cabinet shuffles, regional conflicts, and rapid changes in policy, among many other risks that can render months of relationship-building useless, at least temporarily. And when that happens, there's not much you can do.

The way we see it, the solution isn't to abandon those relationships but instead to build redundancy into the system from the outset, which will require some forethought.

• Currency volatility is a different kind of challenge altogether.

Consultancy fees in emerging market currencies can swing 20% in a quarter.

The World Bank's 2023 currency risk guide recommends US$ or EUR-denominated retainers where feasible. Not always feasible, obviously, but it's a reasonable starting point. And it prevents engagement costs from fluctuating based on factors that have nothing to do with the quality of the insights.

The broader point here is that building a resilient expert mix isn't about eliminating risk because it’s fair to say that it’s not always possible in these markets. It's about anticipating where things might go wrong and having systems in place to maintain continuity when they do.

The Local Expertise Premium

Why pay a premium for local expertise when you could read industry reports?

Because reports describe what the rules say. Local experts describe what the rules do or don’t do.

There is a significant discrepancy between actual legislation and its enforcement. Having people on the ground is often the only reliable way of bridging this divide.

Normally, local experts have good connections with informal decision-makers and family-owned conglomerates, as well as individuals who have the final say on whether a project moves forward.

Unfortunately, this kind of information doesn't necessarily appear in public documents, and, in all fairness, it's not actually written down anywhere.

Cultural fluency is important when entering a new market, obviously. But it's also often the difference between taking years to recover from a reputational mistake and not making one in the first place, which is something that probably doesn't receive enough attention.

• Research from the Global Infrastructure Hub has documented that communication gaps around environmental and regulatory requirements can add substantial delays and costs to projects in emerging markets, especially when companies have to backtrack and meet regulations that weren't properly understood from the start. And that happens more often than you'd think.
• McKinsey's research on emerging markets makes the point that there's really no substitute for local insight: companies need on-the-ground research to understand not just consumer tastes and purchasing behavior, but also what regional competitors are doing, how different regulatory regimes actually work, and what local supply chains are capable of.

One example cited is a consumer products manufacturer that continually failed to break into an emerging market until they undertook some proper local research and discovered that consumers there – unlike in every other country where the product was sold – expected packaging that could be recycled for other purposes after the contents had been used.

That's the kind of information you just can't glean from industry reports, no matter how detailed they are.

The Bottom Line

The question isn't really whether emerging markets offer growth potential. They obviously do. The IMF's 2024 Regional Economic Outlook makes this pretty clear across just about every geography you'd care to look at.

The question is whether the information infrastructure exists to capture that potential without taking on unacceptable levels of risk.

Expert networks function as risk translators in this context, if you want to think of it that way. They convert uncertainty into something a little more actionable.

Not certainty, exactly – that would be overstating the claim. More like informed judgment that is based on direct access to people who actually know what's happening on the ground.

That's the real service, when you get down to it. Not generating call volume. Reducing the options for important decisions.

So, what separates effective programs from ineffective ones?

Research on competitive intelligence and corporate decision-making points to several recurring factors – a diversity of viewpoints, robust vetting processes, and deep contextual understanding of the local conditions.

The volume of interactions doesn't reliably predict the quality of the insights. Having the right experts does.

That last point matters.

The temptation in seeking emerging market advice is to default to quantity – more calls, more experts, more data points. But in environments where the quality of information varies as dramatically as it does in these markets, the filtering function ends up mattering more than the gathering function.

Ten well-vetted conversations with locally embedded specialists will almost always beat a hundred calls with consultants who may or may not actually know what they're talking about.

• The work isn't becoming any easier, it has to be said.
• Regulatory complexity is increasing, not decreasing.
• Political uncertainty in key markets shows no real sign of abating anytime soon.

But the opportunities keep growing too, so there is always that.

It just means considerably more work will be required to understand what's actually happening on the ground.

And for investors and corporates who are willing to build disciplined information-sourcing capabilities, emerging markets remain exactly what they've been for the past two decades or so: the growth engine.