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Corporate Security in China’s World
Blog on International Security • posted 02/20/12
Barack Obama alternated between kind words of cooperation and tough talk during the visit to the U.S. last week by China’s future leader, Vice President Xi Jinping. Dealing with the country requires a deft touch, and it’s no less of a challenge for security executives who must tweak their approach to risk mitigation to match the country, its threats, and its culture.
China is ripe with opportunity but there is no shortage of danger. Joint ventures are often necessary in order for a firm to gain access to local markets in China, which opens up avenues for fraud, especially because security awareness among Chinese firms is extremely low. Some have virtually no security program, according to Gregg Doddrell, Director of Risk Management Services at GRM Shanghai, in a panel discussion on risks in China. Additionally, the very idea of intellectual property rights runs somewhat counter to the Chinese culture, and protection and enforcement of it is in its infancy.
Key goals
1. Forge a united effort to minimize threats. Those who carry out due diligence need to do a complete job investigating partners, distributors, or agents, and it needs participation from the investigative, legal, and financial teams, as well as from niche departments (such as environmental). Those writing agreements need to include clear contractual protection for intellectual property. Those charged with trademark or patent protection need to directly register intellectual property and not pass the job to potential distributors or business partners. Technical personnel must resist providing specifications or samples to keep (which can be used in reverse engineering) until a legal relationship with a prospective partner has been established. Hiring managers need to screen more carefully than ever.
Corporate security may have a limited role in many of these aspects, but security executives, along with others in risk mitigation, play a primary role in assuring intellectual property as a whole, and so they must examine and identify any single area where protection is lacking.
2. Deploy culturally sensitive solutions to threats. Experts on Asia suggest that reducing fraud and driving compliance must be done differently in China than elsewhere. More so than in the West, workers look up to leaders, so compliance in China truly does start at the top. Setting up Whistle-blower programs and conducting compliance training for workers, especially refresher training, is even more important than in the West. Finally, because companies can’t change China to reduce fraud, companies should spend more time on those things that are within their control; namely, making a determined effort during hiring to probe candidates’ views on ethics and compliance.
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Perception Among China Experts & Companies of Fraud Types Most Prevalent in China
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|---|---|
| Corruption & bribery | 27% |
| IP infringement | 23% |
| Asset misappropriation | 17% |
| Accounting fraud | 13% |
| Money laundering | 8% |
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