Compliance with overseas markets
As Chinese enterprises are investing more into overseas markets, compliance with those markets becomes a great concern. It is important for Chinese companies to follow laws and regulations both at home and in foreign countries where they run business during the process of globalization, and this has gradually become a focus to those companies.
On June 8, Wang Zhile, the vice chairman of CCPIT National Enterprise Compliance Committee and the director of Beijing New-century Academy on Transnational Corporations pointed out at the Fortnightly Business Compliance Forum: on the Interpretation and Discussion of GB/ T 357702017 Guide to Compliance Management Systems that Chinese enterprises should consider how to be compliant and how to establish an effective compliance management system rather than wondering they should be compliant or not.
It is said that standards put forward in this guide drafted by China National Institute of Standardization will be officially ratified and released by the General Administration of Quality Supervision, Inspection and Quarantine of PRC as well as Standardization Administration of China and will be implemented on 1 August 2018. This will not only reduce the risks of noncompliance for various organizations, enhance their sense of social responsibilities, realize sustainable development, but also it plays a vital role in shaping a fair market as well as promoting the construction of a lawgoverned country.
China compliance standards in line with international ones
According to the China National Institute of Standardization, the standards, based on the principles of good governance, proportionality, transparency and sustainability, could provide guidance and suggestions on all aspects of compliance management systems and on how to establish, implement, evaluate and improve those systems.
Wang Yiyi, the director of the Institute of Standardization Theory and Strategy affiliated to China National Institute of Standardization said, “Those coming standards are technically the same when compared to international ones. We intend to introduce the universally recognized system standards to China and explore how to innovate based on what we have got. Those standards are mainly concerned with the establishment and improvement of our systems and they stress a lot on contents including good governance, reevaluation of the compliance risks periodicity.” Wang also pointed out, “compliance standards are the new weapon to fight against the trade war and it ensures a standardized environment and brings culture infiltration. We need to set our own rules and speak our voices out loud.”
Wang Zhile stated that the standard would help Chinese companies to set up and run the compliance management system, as well as identify, analyze and evaluate compliance risks, promote the management procedure and provide guidance and suggestions on how to control compliance risks. Once such a system is established in a business, it does not only enhance competitiveness, but also can reshape the original management system and its compliance culture. To establish a compliance management system, we need an appropriate methodology and to ensure that it can sustain testing and operate as soon as possible, the whole process should be conducted under the guidance of widely accepted systems.
A lack of compliance standards leading to passive performance in global competition
When doing the research for the
Guidance, China National Institute of Standardization found that international organizations like the UN and quite a few developed countries have set regulations for strengthening compliant operation as economic globalization deepens since 1970s. Organizations are becoming more concerned about compliance risks and have carried out a lot of research in this respect. Years of practice has taught us that only by establishing such a system can we successfully control and prevent risks and maintain the reputation of our brand. Early in the year of 2006, Australia has issued its national standards in a document called Compliance Program, and many worldknown transnational corporations like Siemens and Microsoft followed suit.
Before ISO/ PC 271 came into being, experts from China National Normalization institute have noticed that since 2007 many industries such as finance, bond and insurance had carried out compliance management under the global wave of strengthening compliance management. Many regulatory documents were released such as Compliance Risk of Insurance Corporation, Trial Regulations of Compliance Management of Securities Company, and Basic Standard for Enterprise Internal Control. Many Chinese transnational enterprises avoided legal disputes over overseas operations and became very competitive in aglobal market while those who haven’t carried out compliance management are banned from access to programs sponsored by the World Bank, thus stuck in a passive situation. Therefore, it can be concluded that it is necessary for China to set our own national standards on compliance management.
According to Wang Yiyi, it is the worst not to establish a compliance management system or not to implement the system. Even though such systems can’t completely eradicate non-compliance, it works well to reduce the probability of compliance risks. In many countries and regions all over the world, many organizations and organizers will use this system as an excuse to mitigate or try to exempt their administrative, penal and civil responsibilities and that could even be accepted by administrative, law enforcement or judicial organs. It has become a common practice for foreign entities to reduce compliance risks by setting up, implementing and maintaining a compliance management system.
Compliance bringing reputation to businesses
In recent years, international community and all governments are dedicated to building and maintaining an open, transparent and fair social environment. At the same time, China is comprehensively advancing its lawbased governance, so in such context Chinese enterprises both at home and abroad should be compliant when conducting business.
What does compliance mean? And what should we be compliant to? Wang Yiyi explained that the word compliance mainly contains two meanings: firstly, it means that we must obey some mandatory requirements such as those laws and regulations; secondly, it means that we need to be compliant to industry standards, core values of different organizations, ethics and code of conduct, policies applicable at different levels. Besides, behaviors such as offering or accepting bribes as well as taking kickbacks are against business ethics and public order and custom; thus they will be restrained by compliance management system.
Nowadays, compliance is not limited to mean anti-bribery as it used to be, it is applied as a more absolute term. Compliance covers four areas including sanction, penalty, politics and competition. Problems occurring in compliance management are mainly related to the evaluation and identification of compliance risks: the easier it is to regulate, the tougher it is to do so; the more difficult, the looser.
Chen Litong, the senior partner lawyer of Beijing Dentons Law Firm said, “We can never go to extremes when controlling business risks. Effective control doesn’t mean eradicating risks, and we should take many aspects such as economic operation into consideration and be prepared for achieving coordinated development in both compliance standards and inner quality standards. Compliance has become a key factor in bringing reputation to businesses.”
Wang Zhile believed that for enterprises to succeed in the global market, they should have a good understanding of different politics, economic situations, laws and cultures of different countries. And they should be clear about how to make further progress on the path to accomplish compliance construction. “Chinese enterprises, especially SOES, are facing completely new competition modes and rules when they are going global. Only when they grasp and understand those modes and rules can our national companies realize leapfrog development and have new experiences about firm growth in developing countries,” said Wang.
He suggested enterprises to promote compliance construction from the top level and the perspective of corporate culture. All compliance departments should be independent despite their positions in different corporations and the compliance department has the right to report to senior management levels, especially to the Board of Directors or its affiliated committees. To ensure the establishment of the compliance management system, it is vital to enforce the implementation of control measures. Besides, governments should help. In recent years, the United Nations Global Compact, the World Bank, the International Organization for Standardization and other international organizations and the United States, Britain and other developed countries are promoting corporate integrity and compliance operation.
Nowadays, compliance is not limited to mean antibribery as it used to be, it is applied as a more absolute term.