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Since the start of the COVID-19 pandemic, countries around the world have put in place social distancing measures and restrictions on domestic and international travel. While we are seeing these measures being relaxed in many countries, China continues to have strong border restrictions. This has changed the way we work, especially for the internal audit and compliance teams ( “IA & compliance professionals”) of multinational companies (“MNCs”). For them, remote audits, compliance reviews and investigations have become more common, particularly in relation to Chinese subsidiaries, joint ventures and business partners.
Travel restrictions have created challenges for HQ and regional IA & compliance professionals without a team in China. In particular, MNCs with a lean presence in China (e.g. the local business predominately operates as a sales office, or the back office was scaled back due to cost cutting) may encounter more challenges, as they are likely to have less in-country governance and segregation of duty which can give rise to issues going undetected for longer. Under this backdrop, this article seeks to highlight some of the challenges faced by MNCs we are seeing on the ground in China.
China remains an important if not key market for many MNCs for business expansion and investment. With no end to cross-border travel restrictions immediately in sight, MNCs should consider recruiting IA & compliance professionals locally or to retain in-country professional resources to assist with reviews and monitoring activities. It is also important for MNCs to continue to enhance controls and technology, such as whistle-blower programmes and third party risk management solutions.