Risk assessment for a de novo company in a developing country Essay

Risk assessment for a de novo company in a developing country - Essay Example This report stresses that auto parts are a two-edged sword in China. The world auto parts industry has discovered that, for those parts that have a medium- to high labor cost component, China is an endless supply of inexperienced and relatively skilled labor that can produce their parts. If our joint venture establishes itself, there may be several competitors who follow in quickly behind us. There are no barriers to entry. Franchise value would allow our company to charge a premium over generic auto parts suppliers for the perceived quality of our products. This is our guarantee that foreign and domestic Chinese automobile manufacturers would like to use our product in preference to a commodity-type supplier. There is a danger of copying in China, which is greater than other parts of the world. As in developing countries such as India, copyright laws and enforcement are relatively weak. If an erstwhile competitor would like to copy our product, and even put our name on that product, it may take some time before we would be successful in closing down that company’s copycat products. This paper makes a conclusion that the audit function is not simply an â€Å"after-the-fact† exercise. The company needs to put policies and procedures in place which conform to SEC disclosure rules and US laws about foreign practices. The Board should create a separate China subcommittee, and review on a regular (perhaps quarterly) basis the conformance to these requirements. In addition, the outside auditing firm can recommend additional ‘safety’ measures to insure that the JV complies.