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Report: Operating Risks in China

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The following report, “The Enemy Within”, by lawyer Mark Schaub, is from a series of articles contributed to ChinaBiz. The report outlines the risks foreign companies face when operating in China, and how to address them.

Key problem areas identified include: Poor Oversight and lack of communications, willful ignorance, and ethical blindspots.

The resulting problems range from the syphoning off of funds (via phantom employees, inflated rents, the use of expensive middle-men etc.), the set-up of competing businesses (sometimes within the same facility!), and the outsourcing of profitable activites (to friends and family).

After suffering losses, companies can resort to legal action via the criminal code and company law, but options are limited, and some of the rules are outdated. It is argued that a better approach is to address the issues at the start (“trust but verify”), do proper due diligence, transfer corporate culture into the new operation, and have a structured apporoach to internal regulations and monitoring.

The full report can be downloaded in PDF format from the China Biz website:

China Business Services provides a range of risk management services in association with our expert local resources. These include due diligence, investigations, asset tracing and recovery, legal and accounting services, and key employee checks. Please contact us if there are any issues you would like to discuss.

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