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The risks of business internal to companies in China and Russia

16.1.2012

In China, a contract is a framework to be shaped with time. In order to avoid breaches of contract, it is worthwhile to hire a good lawyer and invest in the making of the contract. Even though the situation has improved, the old saying from the Brezhnev era should still be borne in mind: "Trust is good, control is better."

This is one of the conclusions from the December seminar organised by CEMAT. The panel discussion at the seminar was based on a report on the safety of conducting business in Russia and in China, which was also published at the event.

According to the data of the research, the risks involved in business no longer threaten the companies from outside, but rather from within. For example, organised crime no longer constitutes a major problem in Russia.

"Instead, it is more difficult to determine where to find good partners and workers. It is worthwhile to verify these things in advance," says Professor Riitta Kosonen (in the picture) from Aalto University, who acted as the moderator of the event.

According to Riitta Karhu, CEO of Konsu Group, there are firms specialising in background checks in Russia. Both China and Russia are huge countries where the average age of companies is very young. For this reason, at this point there is very little transparency.

Good leadership and openness as weapons against corruption

Corruption in the public sector in particular was highlighted in the data. Corruption has increased and become more systematic in both countries, and it is visible in the daily work of companies.

According to Kosonen, the willingness to remedy the situation is there, but so far, actions have been inefficient. The pursuit of national interest may lead to licensing documents submitted to authorities being leaked to local competitors, for example.

"Most of all, corruption is a problem for the Russians themselves, as it exists in all fields of life," stated Marja Liivala, Minister Counsellor at the Finnish Embassy in Moscow.

What, then, could be done about the matter? Good leadership and openness are effective tools in fight against corruption and bribery. Finnish companies must refuse corruption, as their own actions should also, as far as possible, be beyond reproach. In addition, firm control in all matters, starting from documents, is important.

Report on the safety of conducting business in Russia and in China (hsepubl.lib.hse.fi)