corruption in china: recovery-led investigations

1 © Control Risks Group Limited

Corruption In China: Recovery-Led Investigations

Wednesday, July 27, 2016

ethisphere.com / Confidential. Not For Distribution. / © Ethisphere 2016. All rights reserved.

Thank You for Joining

Us

HostChelsie ChmelaDirector of Global [email protected]

QuestionsWe welcome your questions! Please submit them via the chat function on your screen. If the panelists do not get to your questions, we will follow up after the webcast.

Presentation & Materials The event recording and presentation deck will be provided post event.


Speakers

Kent KedlSenior Partner, Compliance, Forensics and IntelligenceControl Risks

Helen JiangDirector Compliance, Asia PacificTE Connectivity

3

www.controlrisks.com © Control Risks Group Limited

July 27, 2016

Kent D. Kedl, Senior Partner, Compliance, Forensics and IntelligenceControl Risks

Helen Jiang, Director Compliance, Asia PacificTE Connectivity

CORRUPTION IN CHINA: RECOVERY-LED INVESTIGATIONSEthisphere Webinar


“The powerful dragon cannot defeat the local snake” 强龙不压地头蛇

VS.

Case studies - where did it go wrong?

Real case examples Business continuity

A local GM was terminated for embezzlement based on evidence uncovered from an internal audit.

Company sent out a company-wide announcement that the GM was terminated for “gross misconduct”.

Insulted by the announcement, the GM took possession of the company chops and business license, and continued to represent himself to employees and customers as the GM.

Reputation

A US company decided to terminate 27 distributors for fraud.

In response, distributors started using WeChat to attack the company for illegal business practice.

Orders were cancelled as a result, and company was forced to reinstate the distributors.

HOMEEClick to return to the introduction


Regulatory On the advice of counsel, a European company

terminated a number of corrupt sales agents. One of the agents had strong political connections, and

passed details of corrupt activities to the local authorities. An official investigation was launched against the

company.

Real case examples – cont’d Financial

A European conglomerate acquired a Chinese company and retained the former owner to continue as GM.

Growth rate was disappointing. Internal review found that the GM had been diverting sales to a competing business that he set up.

Representatives from HQ fired GM. GM then locked the reps out of the operation, moved molds and equipment to his own factory and started to take clients away.

When the solution is the problem


Labour laws favour the employee over the company Chinese economy slowing…difficult to find another job High threshold required for authorities to intervene Tolerance of conflict of interest Face…and losing it Heavy reliance on hard-copy company credentials –

company chops and business license

So how did it happen?

We believe this is because the traditional linear approach to an investigation is actually causing problems because it does not take into account some unique features of China’s business and legal environment:


Your real objective Prevent an investigation from becoming a reputation and commercial issue

with your clients, partners, employees, regulators and the media Ensure continuity of business operations, supply and distribution Improve overall business operations, controls, compliance and risk profile. Find evidence and take action

Your objective is to recoverTypical objective of an internal investigation

Find evidence and take action

Control Risks recommends a “recovery-led” approach when planning and conducting an internal investigation.


Primary focus on business continuity Taking into account unique challenges of operating in China It is critical to add a few, very important, steps:

The “recovery-led” approach


Without a plan in place, taking actions in an internal investigation can lead to a crisis.

We find that when companies take a “recovery-led” approach to investigations, the problem – though challenging – is ultimately resolved in the best long-term interests of the company.

Conclusion

Questions?For further information, please contact [email protected]

Visit us at: www.controlrisks.com

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