Corporate Fraud and Corruption in China
Businesses in China are reporting greater rates of internal and third-party crime but mitigating the risk is not straightforward. Is your company adequately protected?
More than 60% of organisations in China say they’ve experienced fraud and corruption in the past two years as recent challenges across the region fuels a slowdown in economic growth.
Understandably, senior managers are spending more on advanced technologies, employee reporting systems and expanding whistleblower programmes to protect their businesses.
But a word of caution: starting an internal investigation directly without risking significant financial and reputational damage is not easy in China. The complex business and legal environment has a general tolerance for conflicts of interest, a culture of trading favours, high thresholds for intervention by the authorities and labour law concerns.
Additionally, the Chinese legal and regulatory landscape is unique and ever-changing. New and evolving laws and regulations require careful navigation, particularly with the risk of enforcement from a range of Chinese regulators in the current volatile, geopolitical environment.
Given their global footprints, multi-national corporations (MNCs) in Greater China have to comply with rapidly developing local rules relating to corruption, cyber security, and trade as well as managing the risks relating to international laws.
These factors should be considered as more and more multi-national companies strengthen their fraud-awareness training and review their policies and guidelines around anti-fraud, code of conduct, conflict of interest, anti-bribery and corruption.
Furthermore, as many companies rely heavily on third parties for doing business in China, a significant area of compliance risk is the use of dealers, distributors, agents and subcontractors.
Third-party risk has increased in recent years due to enhanced scrutiny from a range of enforcement agencies. Companies also have less control over the conduct of external people than that of their own employees. The proliferation of third-party arrangements and the evolving landscape adds to the challenge.
Businesses in high-risk areas such as pharmaceutical and biotech are particularly at risk and should focus on third-party due diligence and risk assessments to mitigate the rapid increase of this kind of fraud in China.
But compliance controls and monitoring efforts alone often fail to keep up with the pace of change. And with companies actively looking for ways to manage costs, while at the same time facing shifting and evolving compliance risks, many are still addressing fraud prevention by using a reactive, defensive approach. At Perun Consultants, we can help you navigate this complicated landscape by offering you the expertise and service you would expect from one of the “big four” at boutique prices.
This story is part of a longer interview with Gwynn Hopkins that appeared recently in Financier Worldwide. You can read a PDF of the full report here.