Risk Diversification and Asset Protection

Geopolitical and economic uncertainties pose significant risks for businesses operating in a single jurisdiction. By structuring corporate entities across different countries, companies can shield themselves from sudden regulatory changes, economic downturns, and legal threats. This strategy ensures financial stability and long-term business continuity.

Economic Stability Through Diversification

Different countries experience varying levels of economic stability. A business with operations in multiple regions can balance the risks associated with inflation, currency depreciation, and political shifts.

• Türkiye’s inflation rate (2023): 36% (Turkish Statistical Institute, 2023)

• Hungary’s inflation rate (2023): 17% (Eurostat, 2023)

• Germany’s inflation rate (2023): 6% (Deutsche Bundesbank, 2023)

By maintaining an entity in a stable EU country like Hungary, businesses from Turkey or other emerging markets can secure assets in a lower-inflation, EU-regulated financial environment. This protects revenue from local economic fluctuations.

Legal Protection Against Local Risks

Every country has different laws regarding foreign investments, taxation, and business ownership. Sudden changes in regulations can impact operations significantly.

For example:

• In 2022, Türkiye introduced stricter foreign exchange controls, limiting the ability of businesses to freely convert Turkish lira to euros or dollars.

• A Turkish company with a Hungarian subsidiary can bypass such restrictions by keeping its EU-based revenues in euro-denominated accounts (Turkish Revenue Administration, 2023).

• In Germany, labor laws and tax rates have remained relatively stable, making it a secure jurisdiction for long-term business operations (Germany Trade & Invest, 2023).

Mitigating Political and Regulatory Risks

• If a government imposes higher taxes or nationalizes industries, a business with a subsidiary in another country can shift operations to protect its interests.

• If trade barriers increase, an EU-based subsidiary ensures continuous market access within the single market.

Conclusion

Risk diversification is an essential part of long-term business planning. By establishing corporate structures in multiple countries, businesses can protect assets, stabilize revenue, and secure financial flexibility in response to economic or political uncertainties.

References:

• Turkish Statistical Institute (2023). "Inflation Rates and Economic Indicators." Retrieved from: https://www.tuik.gov.tr

• Eurostat (2023). "Inflation in the EU." Retrieved from: https://ec.europa.eu/eurostat

• Deutsche Bundesbank (2023). "German Inflation and Economic Stability." Retrieved from: https://www.bundesbank.de

• Turkish Revenue Administration (2023). "Foreign Exchange Regulations." Retrieved from: https://www.gib.gov.tr

• Germany Trade & Invest (2023). "Foreign Investment Protection in Germany." Retrieved from: https://www.gtai.de