Red Flags

It will be prudent to look out for red flags which could indicate potential compliance and ethical breaches, in turn leading to reputational / legal risks to your organisation. A red flag does not mean a total STOP but a warning sign which requires certain level of questioning, background research and verification.

Global Oversight can help you verify your red flags and also recommend countermeasures. Check out the following examples of red flags. Do you experience them in your business?

Invisible Supplier

You have a new supplier in an Asia Pacific country and you have only dealt with this supplier through the phone and email. A few times you mentioned to the proprietor of the supplier that you would like to visit their factory but he has been discouraging you visiting. This is a RED FLAG. Potential risks could include:
  • the supplier is not bona fide and may be a fly-by-night operations
  • the supplier’s factory and working conditions may not meet health and safety standards
  • the supplier could be using child labour

Dirty Money

You have a customer in China. When you receive payments from the customer for products supplied, the payment comes from a personal bank account out of Macau of a third party that is not officially linked to the customer. This is a RED FLAG of possible money laundering. Do you have necessary anti-money laundering policy/procedures? Do you know your customer?
 

Two Timer

Your Sales Manager hits his monthly targets, but always the minimum target. But most of the time he is away from the office and when he’s in the office, he’s always on his mobile phone or responding to emails from his own personal laptop computer. He claims that he’s busy servicing his clients.

This is a RED FLAG. While working for your company, he may be running a similar business on his own, parallel to yours. This could lead to a conflict of interest situation and a loss to your business.
 

Creative Money Management

You have a distributor based in Vietnam who covers Vietnam, Thailand and Cambodia. He has made a special request that all his commissions and incentives be paid into a bank account in Labuan, East Malaysia. The beneficiary of the bank account is the distributor’s sister. This is a RED FLAG of a potential tax evasion. Do you have necessary controls and compliance policies / procedures?
 

Greaser

You are planning to expand into Africa and to facilitate this, you are planning to engage a consultant based in Africa. A potential consultant claims he is well networked. His fees are high but he guarantees that he can lay the path smoothly for you and all your permits / licenses will be approved.

This is a RED FLAG. Do you know his background and reputation? Is he a government official? Do you have due diligence procedures in place? Do you have a Know Your Business Partner Policy?