Risk of disputes from transactions through social networks in Vietnam | ANT Consulting

 Social networks have become popular and become an indispensable part of modern life. Along with the development of the internet, social networking applications are also used by many people as a transaction method to exchange and conclude contracts or business transaction with each other. When a dispute occurs, it is difficult for the parties to prove the transactions and the parties involved. Hence, it is important to conduct background check on the business counterparts from financial, operational aspects instead of blind belief in the exaggerated advertising or discounted offer from them.

In fact, many individuals and organizations have reported that their partners have denied purchase and sale transactions through social networks and caused huge damages. However, the evidence provided is only messages, icons … stored in social networking applications that carry many meanings and are easily confused in interpretation. These are quite common electronic transaction disputes today, but there is no strict legal corridor to protect parties with legitimate interests.

The legal system has not kept up with the strong development of the internet business. As a result, it raises a number of complicated issues, beyond the control of legal regulators and creates many difficulties and challenges when business disputes occur over social networks.

Specifically, many individuals engage in commercial activities but does not have a fixed location and do not register business with any authorities. They might advertise over the internet with buying and selling goods and services without having to be responsible for any consequences for fake products or inadequate delivery of quantity or maybe even scam.

It can be seen that the lack of business registration makes it difficult to determine the truthfulness of the transaction and the competent authorities do not know the information of individuals and organizations transacting on social networks authentication of transaction status on social networks when participating in business.

According to the law, electronic data messages are expressed in the form of electronic data exchange, email and other similar forms according to the provisions of the law on electronic transactions. Electronic is also a source of evidence used as a basis to determine the validity of a transaction. Therefore, it can be seen that in fact transactions via social networks are also a form of electronic transactions with legal value. However, these transactions present a lot of potential risks because it is difficult to prove to the authorities when dispute arise.

Because these accounts can be easily disabled, communications can be deleted or hidden, and the name of the account holder is easy to change. Moreover, when transacting and exchanging via social networks, the parties cannot control whether the person being exchanged is an authorized person or not. The violating party will rely on the above reasons to deny all the content discussed with the partner.

Transactions through social network platform are thriving and are expected to bring value. However, in order to contribute to promoting the sustainable and safe development of this type of business, more legal regulations governing related issues are needed. In addition, in order to limit disputes and risks in these transactions, individuals and businesses need to carefully check the partner information, from authenticity, adverse media, reputation online or engage third party consulting company to verify business registration, search business shareholders information, visit office or operation site for audit, undertake background check, criminal record for protection of interest if the dispute occurs.

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Tips to reduce risks when purchasing medical supplies from Vietnam | ANT Consulting

 As the Covid 19 pandemic is still occurring in many countries around the world, a large number of medical equipment or accessories being Personal Protective Equipment (PPE) such as N95 respirator masks, surgical masks and other items essential to protecting doctors, nurses, others on the front lines of the pandemic are required to be purchased and sold from many different countries to meet the demand for treatment disease globally.

Vietnam is a country that has many enterprises producing medical supplies such as medical gloves, medical masks, which are the focal points supplying goods to many businesses around the world. However, buying and selling quickly, and without researching their partners has caused many businesses to face many risks when purchasing of medical supplies in Vietnam. Here are some tips for buying and selling medical equipment in Vietnam safely and effectively.

Searching for a partner is the necessary work. Currently, to meet the increasing demand for buying and selling medical supplies, many companies switch to the medical supplies business as the broker to take opportunities in this field. It will help the buyer finding a selling partner more convenient because more brokers reach out to buyers. However, there are many sellers who do not have a valid business registration or are not able to supply the goods, however, they still approach the buyer and guarantee to deliver the goods on request. Many buyers have been deceived by businesses that are not capable of doing business with the deposits, failure to deliver goods, deliver the wrong quality, quantity, … Therefore, searching for the seller carefully, and undertaking due diligence on the seller with the help of local risk management company will help buyers to avoid the risks of buying the wrong goods.

In terms of product prices, when buying medical supplies from a third party (not directly from the manufacturer), the price of the equipment could increase many times compared to the price offered by the manufacturer. Sometimes, the brokers could not fix the price because their offering price depend on the buying price they receive from manufacturers or traders while the supply of goods are not guaranteed. This could create problems for the buyer if the delivery and price have been committed to final clients oversea with hefty fine clauses if breaching the contract.

When trading with an unqualified seller, there is a risk that the seller cannot meet the required quantity of the goods, especially in the case of the sellers are not the manufacturer. Because the number of goods produced could not meet the demand, in fact, many manufacturing companies in Vietnam have stopped accepting orders for some time from many customers. However, many the third-party continue to receive orders from buyers, resulting in an inability to deliver on time or inability to meet the required quantity. When having a request for delivery from the buyer, these sellers will not answer the buyer’s questions, refuse to receive phone calls, emails, … leading to the buyer being inaccessible to the seller at this time which affects the business of the buyer.

Especially in the difficult situation when limited traveling between countries are allowed due to the pandemic, the discussion via electronic means such as Email or social network platforms, … will help the parties can discuss in an easy way. However, discussion or exchange of information via electronic means, will meet potentially risk when the buyer exchange with another third party (who may not be representative of the seller). In many cases, the parties exchange messages via regular messaging apps, which cannot determine if the subject exchanging is exactly the seller or not. In the event of a dispute when buying or selling goods, this proof is that the message which cannot determine the sender shall not be enough to prove the wrongdoings. Therefore, when exchanging communication, the parties should take precaution steps to verify the other parties ensuring the exchange is carried out properly with the authorized person.

In addition, to ensure the rights in the purchase and sale of medical supplies, signing the sale and purchase contracts is extremely important. The contracts should be in written and duly signed and stamped by parties. Trusting in business should be accompanied with legal documents for sustainable business. When performing the contract in accordance with the regulations of the law will help the parties to limit risks and this is considered as specific legal evidence that forces the parties to comply with regulations and ensure their rights when buying and selling goods, especially international sale goods.

Finally, with significant transaction, the buyer could minimize risks through the helps of local risk management company in Vietnam to undertake due diligence on the seller’s business registration certificate, business location, real operation at site, adverse media check for past wrongdoings and general personal or corporate reputation.

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Why do we have to undertake background check before recruitment? | ANT Consulting

 Recruitment is the process of screening and recruiting qualified people to meet a job in an organization in general and in particular business. Recruitment plays a very important role in business development. Effective recruitment will provide businesses with a team of skilled, active, creative employees and provide human resources in accordance with the business performance of the business. Only when doing well the recruitment stage can we do well in the next stages. Therefore, businesses need to recruit the right people right the first time as well as arrange them in an important position.

Most of the information that enterprise has is provided by the employee and there is no verification of the information. And if the enterprise only relies on the information provided by the employee, it is likely that the employee is dishonest, or causes mistakes and avoid responsibility. To recruit “right employee, right job”, enterprise needs to check the applicant’s background.

Checking employee’s background is to create trust between enterprise and employee. The background check includes: Verify Identification; Verify at home; Verify qualifications and certificates; Verify employment history at old jobs; Verify criminal records in Vietnam.

Verification of the background helps to know personal information, origin, hometown, criminal status of the employee. Thereby, background check will minimize commercial risks; preventing fraud and internal theft better; increase security of data and documents in the enterprise. In particular, for important positions in the enterprise, the confidentiality of enterprise document information is extremely necessary.

Verifying employment history at past jobs is to understand working process and the reason for job termination; obtain an objective view of the necessary competencies, skills and work experience. From there, enterprise could save time in searching for suitable employees as well as saving labor training costs.

In addition, background check improves business efficiency, developes a team of integrity to meet the business requirements of the enterprise. Because recruiting well means finding out people to perform the job with the capabilities and qualities to complete the assigned work, then effective recruitment helps the enterprise perform well its business goal and improve profitability.

Currently, the situation of fraud, diploma trading, or dishonesty in recruitment, many enterprises cannot control and verify all the information that employees provide. Enterprises need to check applicant’s background when recruiting to prevent fraud, internal theft; increasing security of data and documents in enterprises; decrease recruitment time and training costs. Besides, creating trust between businesses and employees; increase employee productivity and product quality as well as increase business profits. It is suggested to consult with professional background check service company with proven track record in Vietnam to help with the local service.

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Risk Management Necessity in Vietnam?

As Vietnam further integrates into the world business, more investors are eyeing Vietnam for investment. As part of investment due diligence, risk management are always well considered before foreign investors decide to do business with Vietnam partners.

In any parts of the world inluding Vietnam, risk is an inevitable factor in business operation activities; higher return is always accompanied by higher risks. Coping and managing risk is an integral part of any business in order to make profit and create value to shareholders in import export transaction, investment, or merger and acquisition activities in Vietnam.

However, in our daily consulting practice, we have seen a number of businesses whom do not manage risk effectively and furthermore not fully understand about the risks that they are facing.

Typical risks in developing countries like Vietnam are political risks, policy risks, regulations risks, credit risks, bribery and corruptions, and organized crimes.

On daily transaction in trading, according to Vietnam Ministry of Industry and Trade, there are situations a number of corporate scams between Vietnam and foreign enterprises are reported. In particular, foreign companies sell goods or provide services to partners in Vietnam and in return the Vietnam partner fail to pay.

On a larger scale in FDI through business formation or M&A origination and execution, businesses that do not improve the risk management process will have to face with a lot of different types of risks: serious financial losses, adversely affecting cash flows and the value of shares, decreasing prestige with customers, employees and investors.

Many business leaders often put heavy emphasis on the business activity, profit, and revenues instead of concentrating more on risk management especially understading business partners through corporate intelligence investigation, background studying, adverse media search through professional consultants in Vietnam whom understand languages, cultures, legal environment and busieness practices. Further searches could help foreign investors to understand the company itself, owners, shareholders, members of board of directors of partner companies whom make daily decisions of the business.

In the period that global crisis has been predicted that almost bottom out and start to show signs of recovery, although the recovery process can occur with different speed and characteristics depending on sector and location of the business, the fully preparation of business in all aspects including process and risk management strategy could helps business not falling into the passive and also have more possibilities to take advantage of growth opportunities after the recession.

Recently in Vietnam with the impact of high inflation rate and economic recession caused by the global financial crisis, enterprises are increasingly concern about risk management activities. Many experts believe that an effective and well organized risk management system will help businesses withstand and overcome fluctuations.

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Classify Risks in Business Environment

Risks are varied and often change. It evolves according to the changes and evolution of the business environment. There are many ways to classify the type of risk, depending on the field, origin, function, scope, impact, occurrence and severity of harm…

However, we can generalize several common risks in the business environment in Vietnam as follows:

First is financial risk. Financial risk can be defined as the risks in the field of financial management such as credit risk, exchange rate, interest rate, liquidity, investment, asset, liability and cash flow… In recent times, many Vietnam companies are reeling from interest rate risk (interest rate goes up too high) and investment risk (inefficient investment); while banks are reeling from credit risk (bad debt). The risk in exchange rate also caused many hardships to import businesses. After signing the contract to purchase goods in foreign currency, the exchange rate increased unexpectedly. Financial risks could be considered risk that covers all risks because the result of these risks, whether they are non-financial, is more or less led to financial losses.

Second is policy risk. Policy risk is the risks related to Government policy. A new or changed policy can bring business opportunities for this group of enterprises but can cause severe damage to other business groups. The policy to open door or close door to foreign firms may affect the operation of domestic enterprises. A tax policy changes could make many business owners scared.

Next is strategic risk. It is defined as the risks related to the planning and implementation of strategies. A strategy is selected by emotion; lack of careful analysis can potentially lead to failure. The multi-sectoral strategy of many enterprises recently is clear examples of strategic risk when businesses participate in new industries that does not based on its core competences. Even a properly planned strategy also has risk of failure in the implementation process. Also, along the way of a long-term strategy, there may be fluctuations that if businesses do not have the appropriate adjustment steps, the risk of failure is unavoidable.

The fourth type of risk is brand risk, which is the risk related to the image and prestige of the brand. A company that has illegal activities, deceiving consumers, harmful to people’s health and environment could make bad brand image. As a result, customer will boycott, the company may become unprofitable and even bankruptcy. In other case, a company trying to build a brand without protection, it will be imitated by competitors or furthermore will also go bankrupt as a consequence.

The fifth type of risk is technology risk. It can be defined as the risks related to technology. For example, desk phone is almost dead with the development of mobile phone with cheap subscription fees.

Next, the seventh type is legal risk. Legal risk is the risks related to the law. Enterprises can accidentally or intentionally violate the law. On the other hand, law can also vary according to the negative direction for the business. If enterprise does not update legal information and conduct early identification of legal risks, business can easily fall into situation of legal violation or loss of competitiveness when required to comply with the law.

The eighth type of risk is human risk. Human risk is the risks related to the corporate workforce. Talented people and key personnel can leave the enterprise for any reason. The gray matter of the enterprise (often accompanied by technological know-how and trade secrets) can flow to competitors. In contrast, businesses may inadvertently acquire vandals come to work in the enterprise. Incompetence and poor ethics general manager or senior management is capable of making a business to become bankrupt. That is not including other risks related to the strike, shortage or surplus of human resources… In fact, human risk could par with the financial and business risks because since its adverse effects are not inferior.

Ninth is operational risk, which is the risk relating to management and operation capacity of business, including management system, operational process, policies, rules, regulations, operating procedures, the way of management and administration and also the use of human in the operating system. A loose management system can create multiple vulnerabilities, causing loss of property and money; an unreasonable or lacking strict control operating procedure may give rise to violations, leading to malfunction or damage. The flaws in personnel arrangement are not only reducing the working efficiency but also obstructing and even hazardous for the development of enterprises.

Tenth is the market risk, which is defined as the risk related to the movement and changes of the market, including products, customers, consumers, suppliers, partners and competitors. Changes in consumer trends can make it difficult for many businesses. The new competition ways from rivals may directly threat to the normal operations of the business.

Next is the contract risk. Contract risk is the risks related to the signing of the cooperation agreements, economic contracts and contracts of sale… The terms that lacks of clarity are detrimental, leading to damages to the enterprise in case of disputes.

Twelfth is the security risk, which is risk related to information. Technological know-how and trade secrets might be revealed or leaks. At normal levels, businesses may be imitated by competitors. More specifically, the entire plan or strategy can go bankrupt.

In addition, there are other types of risk that could be mentioned as disaster risks (natural disasters, fires, explosions, accidents, war, violence…), relational risk, communication risk and risk in the application of information technology…

Most of these types of risk, enterprises are commonly encounter. If they know how to manage risks, businesses are more likely to evade, disable, minimize negative impacts or at least actively embrace and respond in the most appropriate manner.

ANT Consulting assists clients with Market Entry, Legal Advice, Tax Advice and Outsourcing Services in Vietnam.

We are located in Hanoi, Da Nang and Ho Chi Minh City.

Talk to our consultants at +84 28 730 86 529 or email us ant@antconsult.vn

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