Politics, technology and economy shape top business risks in 2014

Businesses must adapt to complex new business practices, regulatory environments and economic opportunities.

TORONTO – The easiest thing about the year ahead for business may be the stable, albeit modest, economic growth predicted for Canada. More challenging, it will also be a year in which businesses must adapt to complex new business practices, regulatory environments and economic opportunities as diverse as a whole new model for trade with the European Union to dealing with the fallout from a smartphone left behind in cab.

“In Canada, we have political and economic stability, a sound financial system, smoothly functioning markets and a wealth of natural and intellectual resources,” said Sean Weir, national managing partner and CEO of Borden Ladner Gervais LLP (BLG). “As we look to 2014, we are expecting a number of evolving and often stringent regulatory requirements, as well as increased public scrutiny.”

The changing political, economic, technological and regulatory worlds mean a host of new risks and opportunities for business, each with its own set of critical legal considerations. In the fall of 2013, Canada and the European Union shook hands on the biggest trade agreement in Canadian history, giving Canadian businesses about a year to figure out how open trade with the EU will affect them in 2015. With that in mind, law firm BLG has compiled the top 10 business issues with legal implications for 2014.

This is what they forecast:

Employee rights, employer wrongs: This year, employers need to rethink termination clauses in employee contracts. Recent case law may make them unenforceable. At the other end of the employment spectrum, the patchwork of provincial regulations across the country that cover unpaid internships has come under intense scrutiny and will likely result in changes.

Entrepreneurs, access to capital and the crowd: Canadian securities laws, even for raising small amounts, are complex. The US has taken some steps to address similar problems and Canadian entrepreneurs are pushing for “crowdfunding,” through which they extend their friends-and-family network to the Internet, seeking small investments from many people. Crowdfunding sidesteps the cost and expense of venture capital and private placements, and it also skips due diligence and other investor protections. Meanwhile, Ottawa has launched the Start-Up Visa program to lure international entrepreneurs to Canada if they can win a piece of Canada’s small venture capital or angel investor pie. Canadian securities regulators will continue to be challenged to properly balance the protection of investors, fostering of confidence and operation of fair and efficient capital markets.

The intersection of energy policy and social licensing: The twin issues of energy policy and social license will be centre stage in this year’s changing political and geographic landscape. Washington and Ottawa will work to find a way to get Canadian crude to US refineries, while the provinces seek agreements on the interprovincial flow of oil and natural gas. The thawing of the Northwest Passage makes investment in the Arctic Bridge between Churchill, Manitoba and Murmansk, Russia an important economic opportunity. But everywhere there are First Nations lands that must be crossed to leverage those opportunities, creating requirements for both legal and social license from Aboriginal communities.

Canada is open for business, unless it’s not: Canada’s abundance of natural resources and its financial and political stability make it an ideal country in which to invest but navigating the complex, multi-jurisdictional landscape of regulations, community consultation processes and politics will continue to make it a challenge for many businesses to realize value from their investments. Canada’s oil and gas sector cannot command market prices for their products because of challenges getting their products to market. Building pipelines will continue to be a regulatory-political morass, and transporting product by rail will face serious scrutiny and new regulatory challenges. The Investment Canada Act, “net benefit” test, uncertainty around what could be deemed a state owned entity as well as no guidance on what might trigger a national security review, add layers of complexity that suggest “Open For Business” is highly conditional.

Growing value of intellectual property: Canada has enormous natural resources that are much in demand on global markets but increasingly we are also seeing the value of intellectual assets as a major investment draw. Some industries such as high tech and life sciences are highly focused on intellectual assets but in general intellectual property is under-exploited, including in natural resource fields such as oil and gas. Knowing how to identify, license, protect, enforce and monetize intellectual property will grow in importance in 2014.

Data security in the electronic era: If you’ve got data in 2014, you’re at risk. Whether it’s locked down in a server room, floating in the cloud, forgotten on a smartphone left in a cab, or on a misplaced thumb drive, organizations large and small have a legal responsibility to protect their employees’ and clients’ data. They also have an obligation to shareholders to protect their confidential information and intellectual property and protect against intentional attacks on their networks and systems.

Governance and who’s watching the watchers: Boards have never been under more scrutiny and in 2014 this will only continue. Besides securities commissions and stock exchanges, activist shareholders have never been more powerful, or plaintiff class action law firms quicker to take action. Self-regulating organizations such as the Investment Industry Regulatory Organization of Canada (IIROC), and the Mutual Fund Dealers Association of Canada are increasingly vigilant in their own investor protection and oversight role. Such scrutiny is true not only for publicly-held corporations but also for privately-held ones.

Find the entire list of business risks accoring to BLG here.