Topics Discussed and Key Points:
● The story behind Control Risks and how it expanded to other markets
● Defining “political risk” and its relevance to businesses in China
● Does the government move as fast as the economy and how do businesses adapt to changes in China’s regulatory landscape?
● How to do due diligence in China versus other North Asian markets
● How should political and regulatory issues be considered when approaching due diligence?
● With what types of situations can business intelligence and political and regulatory risk analysis be helpful to businesses in China?
Today on The Negotiation, we speak with Rosie Hawes and Carly Ramsey of the China division of Control Risk, a global risk consultancy headquartered in London. The firm’s clients include national and multinational businesses of all sizes in all sectors, law firms, government departments, and non-governmental organizations.
“Political risk,” says Carly, “is very relevant to businesses in China” due to the country’s strong drive to turn China into a modern, developed nation. Regulations abound, therefore, to ensure that business growth in almost every sector is steering the nation toward accomplishing its various political objectives.
And these political priorities, Carly continues, “are not new. Those are long-standing, multi-decade long priorities to develop China into a modern country.” Businesses should operate with this strict regulatory environment in mind by having the right people in place who can closely follow these developments and translate those observations into company action. “This is where we focus: Are you set up to manage this shift?”
Rosie stresses the importance of considering the political and regulatory landscape when conducting due diligence no matter the size of your company as “any company that wants to succeed in an unfamiliar market needs to test the information that they’re being provided”, preferably via a neutral third-party.
“‘Political risk’ is just the risk from political decisions, political events, political actions on business. That is very relevant to businesses in China. [...] There is a strong political priority to develop China into a modern, developed nation. That means that there are political goals in almost every aspect of society.” ~Carly
“Regulatory enforcement is here to stay. It will continue. And new firms and sectors will be targeted. That is just the reality now. But it’s also equally important to remember that Beijing does want the private sector to thrive—and foreign investment to thrive. But there is no hesitation now to make sure that businesses are falling in line in terms of meeting these higher-level political goals.” ~Carly
“We do have to be careful to balance Chinese reporting with Western reporting because both have an element of truth and both have an element of bias. A lot of our clients are not familiar with China so the first thing they will do is Google the company and get a very limited set of information, if at all; or, something that is perhaps not fully contextualized so they really don’t understand what they’re seeing. So, a lot of what we do is trying to make sure that the broader local context is provided so that they can assess how good or bad what is being reported in the media really is.” ~Rosie
“We do work with smaller firms as well. Really, any company that wants to succeed in an unfamiliar market needs to test the information that they’re being provided, and really need to understand—through a neutral third-party—the extent to which their potential supplier or their potential investment target is really trustworthy and really capable of delivering what they’re saying.” ~Rosie