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BW Businessworld

‘Compliance Requires Rules’

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Tad Kageyama, senior managing director & head of Kroll’s Asia operations, talks to Abraham C. Mathews on better compliance practices
 
Q: How do you get companies to adopt better governance practices?
A: When we looked at the potential of big business outside of the US, we found that many companies would not spend that kind of money unless it was a regulatory requirement. Last year, I did work in Japan where a company had 800,000 records stolen by a contract employee. They responded very quickly, but that was because there was a law in Japan that required private data usage firms to report to the regulator that they had lost or misplaced private data. So, they spent a tremendous amount of money and time doing this.

Q: So the answer is stricter laws?
A: The word compliance is currently associated with anti-fraud, or anti-corruption, but compliance simply means compliant with certain rules and regulations. So, unless there are rules and regulations, there is no incentive for companies to have a compliance programme.

There is also a danger to this because even when there is compliance, typically the goal is to meet the rule. Many times, rules are written in a vague way. For example, in Japan, there is a rule for banks that says you shall not engage in business transactions with anti-social forces (ASF).

Now, who is an ASF? The government website indicates what they are, but not who they are. So, banks struggle to understand how they can stay compliant. That’s how regulations are, they are not written in such detail and perspective that you know that if you are within the boundary, it is okay; and you’re not okay if you are not within that boundary.

Q: How do the Japanese view India’s investment environment?
A: The attitude towards Indian businesses in terms of strategy has not changed. I can say this about Japanese companies. They are still very positive and aspirational about doing business in India. But, how they enter the market and manage joint venture relationships has changed. They are being more careful, doing more homework, using external advisers to look at potential investments’ compliance programmes, and carrying out third party due-diligence to know if there is any risk of corrupt money going to public officials.

Q: What is the response to Make in India campaign?
A: It is an opportunity to import process improvements, technology, innovation, best practices, and so on. Japanese companies are looking far beyond making products at low cost in India. India operations are going to act as a hub for export of products to the Middle East and Africa. Companies are considering India to be more of a creative hub rather than just a place tomanufacturing.
 
(This story was published in BW | Businessworld Issue Dated 20-03-2015)


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