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The Transparency Vaccine

Six ways transparency can help you


March 24, 2008
By By Thomas Travis

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Do you know what’s really going on in the factories of your overseas manufacturing partners and suppliers? Are you sure?

Do you know what’s really going on in the factories of your overseas manufacturing partners and suppliers? Are you sure?

If you can’t answer that question with a confident yes, your brand could be at risk. So could your profits. In fact, so could your customers – not to mention their pets and kids. Just ask the companies involved in the well-reported cases of recent months: Menu Foods (the Canadian pet food company whose contaminated products affected numerous cats and dogs), Colgate-Palmolive Co. (whose brand was sullied due to a contaminated counterfeit version of its toothpaste), and various retail stores (that had to pull from their shelves the popular Chinese-made Thomas & Friends wooden train sets, which were coated in lead paint).

That’s right. These companies would no doubt agree that if there were a 100 per cent foolproof way to ensure that their products were safe, they would take it, no matter what the price. There’s no such thing as “foolproof,” of course. But you can take steps to minimize your chances of having a product contaminated and distributed – and transparency is the magic word.

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These kinds of problems aren’t new – think back to the Tylenol crisis in the early ’80s – but there’s little doubt that globalization has made them far more likely. With today’s far-flung manufacturing facilities and ever-present threat of terrorism-related security risks, global entrepreneurs face huge obstacles. Savvy leaders address these obstacles by taking precautions to create transparent companies.

Companies that follow the Tenets of Global Trade can achieve a level of transparency that will help them decrease the likelihood that their products will end up in a recall report on the national news. Think of it as a “vaccine” to protect your products (and your reputation) from contamination.

Transparent companies are connected at every level. Each department knows what the others are doing and there is always open communication between the company and its partner companies in the supply chain. In the modern business environment companies involved in international trade not only must ensure that their own operations are able to withstand scrutiny by investors and regulators, but that they also push this culture of openness all the way back down their supply chains. The risks associated with not doing this are simply too great to take on.

A company responsible for bringing goods across borders must be able to ascertain who is supplying what to whom throughout the manufacturing, shipping, and distribution processes. While we can’t say what happened in the pet food, toothpaste, and toy cases, we do believe that creating a transparent company can reduce your risk of running into similar problems. And it can make problems easier to detect and handle when they do occur. 

SIX KEY REASONS
Transparency will help you protect your mark. Make sure your mark doesn’t show up in unwanted or damaging places. Your intellectual property – your patents, copyrights, and trademarks – are some of your company’s most valuable assets. Each time you license your intellectual property to a third party or engage a factory to produce goods that carry your logo, you are taking a risk that your mark will be misused or misappropriated.

We’ve all seen how damaging it can be for a company’s logo to be associated with some illegal activity. The only way to monitor this important asset is by establishing a system of transparency through contractual arrangements and regular monitoring. And while no self-monitoring system will guarantee total brand protection, without making your best efforts in this regard, the likelihood increases that you will end up seeing poor-quality counterfeit goods bearing your intellectual property in the marketplace.

Transparency will help you manage the public’s opinion of your company. The other important manifestation of your brand, your company’s overall reputation among the consumer public, can be protected only if you take care to keep ethics high on your corporate agenda by employing sound corporate governance protocols.

Transparency in operations is the only way to ensure that your company does not run afoul of its own ethical dictates. Written ethics policies, self-monitoring programs, and publication to your business partners and contractors are sound ways to infuse transparency into your operations in order to avoid both the act and the appearance of impropriety.

Transparent companies can more easily protect their goods from harmful outside elements. In a post 9/11 world, security has become synonymous with transparency. Supply chain transparency has become mandatory for U.S. importers and is fast becoming a requirement for importing in ports throughout the world.

Because the government cannot possibly inspect every cargo shipment that enters U.S. ports, the onus is now increasingly on global entrepreneurs to carefully monitor their own supply chain activities.

Transparency is a requirement if you want to take advantage of certain trade programs. Increasingly, governments are requiring importers to prove up front that they have sufficient internal controls and procedures to thwart any attempts to breach cargo security.

To be eligible for trade programs and free trade agreements, importers are expected to prove that their transactions have complete transparency by mapping out and self-monitoring every stage of production. In return, organizations that qualify for these programs receive ancillary benefits such as increased efficiencies, decreases in waste and redundancies, the potential for cost savings, in-time delivery, andfewer delays.

Transparency can help you be prepared. All global traders should prepare for unanticipated contingencies. Transparency plays a role in readying your company to handle contingencies such as currency crises, political instability, labour unrest, and natural disasters.

Each member of your team, up and down the chain of command, must understand the enterprise’s drills when it comes to acting fast to thwart the effects of surprise problems and issues that affect the flow of business. By keeping your options open and your alternatives transparent, you are assured that every member of your team has his or her marching orders and can quickly react to whatever crisis presents itself.

Transparent global entrepreneurs create more successful partnerships with offshore partners. Nothing replaces the intimacy of personal contact in business relations. By making every effort to be available and by meeting with them regularly, you are making yourself transparent to your offshore strategic partners.

By letting them know who you are, what you can do, and that you are available to them 24/7, you engender an atmosphere of trust and mutual reliance. And only breaking down cultural and geographic barriers, and opening yourself up in a personal way can accomplish this.

So how do you achieve transparency? It’s all about taking care of the details.

Global companies that have achieved transparency keep detailed records, fill out eligibility forms properly, and are prepared to back up any statements they make with evidence of the veracity of their claims. They also act ethically in all transactions and run the most secure supply chains.

Incorporating the critical element of transparency into your global business facilitates communication of responsibilities, goals, and standards of conduct among the different players, teams, and affiliations that comprise the global business model.

If you’re not running a transparent com-pany then you don’t have all of the systems in place to avoid the public relations disasters that can result from other scandals, security breaches, or ethical breakdowns. Transparency truly can be the defining element that separates the successful global companies from the failures in the global market.

Thomas Travis is managing partner at Sandler, Travis & Rosenberg, P.A., a leading international trade and customs law firm. The firm has offices throughout the United States and in Canada, Asia, and South America.


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