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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Potential risk of online transaction in Vietnam and its consequences | ANT Consulting

 The 4.0 Industrial Revolution has developed significantly, which results in the transformation and breakthrough of all areas of the globe. Besides, the Internet and social network has got more popular and become an indispensable part of modern life. Online business, therefore, is formed and conducted the most frequently on social networking platforms. In the process of doing online business on this platform, many potential risks arise and depending on the situation, the people taking part in the transaction might need to involve the business consultant or risk management consultant to assist proving advice or consultancy service to address the matters.

First and foremost, it is very difficult and complicated to determine the identity of the subjects partaking in the social networking platforms in general and conducting business activities on these platforms in particular. Unlike e-commerce platforms which register operation with authorities, which require the sellers to verify their information before doing business, the social network environment allows anyone to participate in without revealing their true identities exposed. User will have an account that may or may not provide their true information after only a few basic registration procedures. As a result, many people have taken advantage of this feature of social networks to commit illegal acts in business activities. There are instances in Vietnam for fraud to appropriate property on a social network which the offender using an account on a popular social network with a fake name, using other people’s photos as his avatar. Next, he bought a fake ID card and used it to set up some bank accounts to start committing fraud. Although he did not have products for sale, but he still posted ads with pictures of selling products at cheap prices on his social network account. If customers wanted to buy, he asked them to transfer money first and promised to send the products to them by post soon after. However, when receiving the money from the customer, he did not send the goods and temporarily locked his account. Beside fraudulent activities, seller’s information is not checked or confirmed, allowing unscrupulous people to readily impersonate others for profit. It is not unusual for prominent business professionals or influencers to be faked on social networking platforms. This action jeopardizes the honor and reputation of those who are exploited while also affecting a large number of legitimate business people. Thus, the fact that social networks do not require business entities to verify their identities, despite helping conduct business procedures quickly and conveniently, causes many problems mentioned before, directly affecting the right to conduct business, benefit customers and stakeholders.

Secondly, no authorities have the possibility to guarantee absolutely the quality of items traded on social networks. The goods listed for sale are extremely diverse in quantity, type and design. Each business subject can sell hundreds of products per day and there are many business subjects on one social networking platform. Therefore, governmental agencies are unable to oversee and manage the origin and quality of each product and service. Many of goods for sales are prohibited or barred from trading. At the same time, sellers can sell fake goods, counterfeit, provide poor-quality ones or sell unknown-origin ones to customers in order to maximize profits. The most serious consequence of trading in unqualified goods is affecting the health of customers.

Thirdly, although Vietnamlaw imposes taxs on business subjects, it is difficult to collect taxes from organizations and individuals conducting business on social networks. That reduces state revenue and creates an unfavorable competitive climate for other sorts of enterprises. The reason is that business on social networks is based on technology, and it is easy to modify and delete information online, so it creates difficulties in identifying and verifying the number of business people and capturing transactions. This situation can be characterized as unfair competition, which is upsetting and unstable for the economy.

Finding the right business partner in Vietnam is also important. We recommend doing research on the reputation of the company and individual shareholders, corporate or individual, gathering publicly available company information, and performing background checks on key personnel to find potential risks in cooperation. Working with a reliable partner can help achieve economic benefits, saving time and money in business.

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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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