Don't Rest Easy
A third assumption is that emerging markets have, by now, modernized and globalized. That's only partly true. Consider China. It has been nearly 10 years since it became a member of the World Trade Organization and adopted a host of new laws and agreements that facilitate more foreign investment.

Those improvements, while critical, often lull executives from developed countries into a false sense of security, asserts Nandani Lynton, adjunct management professor at China Europe International Business School in Shanghai. "Years ago I used to think, 'Oh, there's another CEO who has checked his brains at Immigration.' People were just getting carried away by the huge market and the stories of growth," she says. "The same mistake is being made today, but it's no longer because the markets look so exotic; it's because the CEO or CFO who comes to visit is made to feel so comfortable."

One symptom of this tendency, Lynton says, is that executives "are not asking the questions they need to ask to get beyond superficial answers." For example, she says, "an executive will ask, 'Can we buy this land?' and the answer will be, 'The land is no problem.' What might not be mentioned is that you can't get the title deed, or it might hinge on your partner's relationships with government. If you don't keep asking questions, you'll never find out."

Lynton refers to this as part of the "built-in fuzziness" of doing business in China. "Even now, having gone from virtually no [commerce] laws to shelves full, the laws are written so that judges have [substantial] wiggle room. It's a cultural pattern that often runs counter to an American way of thinking, in which 120-page contracts are the norm."

There's another layer of complexity that can catch foreign executives on the back foot, she says: "You have to be very aware of government in a way that you do not in a developed market. Many CFOs struggle to understand the interlocking of government and business."

This isn't unique to China, and it's more predominant in some sectors than in others, points out David Davies, CFO of OMV, a $36 billion Austria-based oil-and-gas company. "The oil industry is inherently political," says Davies. "Security of energy supply is a fairly critical factor for any incumbent government."

Despite many parts of the region moving closer economically, politically, and socially to the European Union, Davies says they are still under development, including their legal systems. His firm has faced legal issues with current and former employees regarding the way collective employment contracts have been interpreted "that cost us several hundred million euros. We lost cases where any sensible reading of the contract and understanding of modern jurisprudence would have led us to a completely different conclusion."

Far and Away
The final emerging-market assumption worth challenging may take many CFOs far out of their comfort zones, literally. Most companies have figured out that it pays to have their CEOs and CFOs spend time in emerging-market offices — academic studies have even shown that doing so improves the performance of those ventures. But how many would actually move their corporate headquarters to a major emerging market? Insead's Gupta says he can imagine the day when a CEO or CFO will be based in an emerging market, with his or her direct reports located in a developed-country headquarters, the reverse of today's norm.

That trend may not materialize for some time, but Gupta says he knows of a number of developed-country companies "seriously weighing" whether to list on emerging-market stock exchanges. Last June, UK-based Standard Chartered listed on Mumbai's stock exchange, adding to its London and Hong Kong listings and "signaling to India's government that it is there to stay," says Gupta.

The most important ingredient for success, he says, is to "stop looking at emerging markets through the lens of developed markets. That is a recipe for disaster."

Janet Kersnar is a London-based journalist.

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