21 ASIAN LEGAL BUSINESS CHINA • 亚洲法律杂志-中国版 WWW.LEGALBUSINESSONLINE.COM/CHINA COMPLIANCE compliance teams to learn and research new policies, regulations, and practices. On the other hand, it’s a great opportunity. After more than a decade of development, the legal and compliance teams of some private and state-owned enterprises in China are taking on more responsibilities. For instance, many companies require the legal and compliance team to attend senior management meetings and provide opinions on company development issues from a compliance perspective.” DESIGN THINKING Effective compliance practice not only needs to comply with regulatory requirements but also must align with the unique business situations of different companies. Both Tong and Li believe that legal and compliance teams need to possess not just a mindset of “getting things done” but also a certain degree of “design thinking.” Tong shares that, based on the unique characteristics of Zhejiang Orient, the team has focused more on building the overall compliance management framework and system in recent years. “Centering around ‘five emphases,’ which means emphasizing on top-level design, a sound organizational system, an improved institutional system, a sorted guidance system, and a strengthened operational safeguard mechanism, we have advanced the construction of the compliance management system.” To make the compliance system truly effective, Zhejiang Orient has adopted many innovative system design ideas. Tong gives an example: “To solve the division of labor between the group headquarters and subsidiary compliance teams, we explored and established a ‘front shop, back factory’ compliance line management mechanism. The legal and compliance team at the group headquarters, serving as the ‘back factory,’ not only coordinates, guides, and supervises but also refines compliance modules including corporate governance, listed company operations, data compliance, and labor employment, building professional capabilities to empower the subsidiaries.” “The legal and compliance teams of the subsidiaries, on the other hand, acting as the ‘front shop,’ should not only actively implement the group’s requirements but also focus on enhancing compliance capabilities in their respective business areas like trust, futures, and life insurance. They continuously feed back business insights to the headquarters compliance team, ultimately forming a positive cycle of compliance management work within the whole group.” Additionally, facing the complexity of compliance work, Zhejiang Orient’s legal and compliance team innovatively established the “3+N+X” compliance guidance system. As Tong explains, “we have compiled compliance guidelines for ‘3’ key categories of personnel: leaders, managers, and employees; ‘N’ key management segments like corporate governance, listed company operations, data use; and ‘X’ key business areas related to financial operations.” At I-Mab, the design thinking of the legal and compliance team is manifested in the creation of an innovative compliance system. This system focuses on “compliance in business cooperation processes and dispute resolution management systems, accumulating innovative practices for Chinese companies, especially those increasingly engaged in domestic and international business collaborations,” says Li. He explains that the improvement and upgrade of this innovative compliance system stemmed from a major lawsuit the company faced. “In 2018, I-Mab signed two licensing cooperation agreements with an American company. By the end of 2020, the business relationship between the two parties had deteriorated. The other party initiated arbitration at the International Chamber of Commerce (ICC) and claimed over 200 million US dollars in damages. I-Mab ultimately won the case, but the review process revealed many areas for further improvement. Based on the experience from this case, the company internally developed this innovative system.” Li tells ALB that for biotech companies, most industry contracts stipulate decades-long collaborations, marking the start of long-term relationships. During this period, personnel from different departments and levels within the company might interact with the counterpart. The purpose of this compliance system is to ensure stable progression of the collaboration over this extended period. The system is therefore structured on several levels. “First, the legal team needs to provide ongoing daily training for the business team, including the business development team, alliance managers, R&D team, public relations/investor relations team, and even the management, training them from various perspectives to avoid disputes and maintain good business relations.” “Second, in case of emergencies or disputes, the issue needs to be resolved at the earliest opportunity; third, if early conflict resolution is not possible, the legal and compliance team must assess and guide the choice of next steps; fourth, if the situation escalates to litigation or arbitration, the right external lawyers should be hired at the appropriate time to enter the dispute resolution process.” Li admits, “Chinese companies are gaining more experience in signing deals, but few manage to sustain them until they bear fruit. Managing business collaboration relationships over a long period is an art and requires systematic construction from a legal and compliance perspective.” INNOVATIVE THINKING In addition to design thinking, innovative thinking is also crucial for effective corporate compliance. Tong shares the innovative practices at Zhejiang Orient. He says, “In building a compliance management system, it is important first to clarify the management logic and second to introduce scientific methods. We have achieved innovation in some specific operational measures.” He cites the example of the so-called “three lists” compliance management method – including a compliance responsibility list, a process control list, and a compliance risk identification list. “Firstly, the identification of compliance risks is based on the clarity of compliance responsibilities and processes. We innovatively aligned responsibilities, processes, and risk points, facilitating simultaneous standardization and adjustment.” “Secondly, we adopted the ‘Less is
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