Take a deep breath, here is some fresh air.

A man in Tianjin had put a deposit on a Toyota Corolla, then started venting on the Internet when the car failed to show up after three months. Given the anti-Japan sentiment that rages in China’s cyberspace, the griping created a big risk for Toyota.

What did this PR firm do ?

The Beijing-based firm spotted the disgruntled consumer’s postings in one of the 500,000 online forums it regularly searches. Before the topic could draw much attention, Daqi put the buyer in touch with Toyota, which pressed its dealer to deliver the car.

So far, so good. Everything ended up gently and smoothly. Such  PR companies apparently won lots of new contracts this past year, when angry bloggers attacked Carrefour, Nokia, Coca-Cola or Mc Donalds. Here is how they do this:

When online commentary turns negative, the monitors assess whether it might flare up. They figure out who’s generating the criticism—an irate consumer, a nationalist teen, even a rival. Then they consider how fast the complaint is spreading, and whether it’s likely to be picked up by Web portals such as Sohu and Sina. “You know it’s a crisis when Sohu or Sina has created a special page to collect all the news articles and aggregate comments,” as they did when bloggers angry about Tibet called for a boycott of Carrefour in April.

PR outfits hire students to write postings that boost certain brands and criticize the competition, says a staffer at a Western PR firm in Beijing. The job description of one online help-wanted ad reads: “Publicize and popularize [products] via online forums and blogs. Send at least 50 propaganda posts per day.” Workers are offered 1.5 cents per post.

Even if most of PR companies say they don’t pay bloggers, they acknowledge pampering online opinion leader, by inviting them at sessions where they can test products or even taking them on overseas trip.

What If…?

Let’s just imagine for a second that we use the same such a nice PR firms to work- not for but – against a rival brand… Let’s imagine that you enroll a few hundred students, who create each another dozen profiles on popular forums and you get an instant task force of thousands of bloggers, ready to hit the Web.

Just spice the whole thing up with a few algorithms to generate some web traffic, bookmark this on popular social bookmarking sites and spread the word on social networking sites… What do you get ? A disaster.

A typical example is how British Airways’ reputation was damaged by employee comments on Facebook, read the full post here.

What to do then ?

Basically 3 steps:

1. Create you online profiles, manage these profiles, monitor the buzz.

2. Optimize your online presence by posting positive comments about your brand before being hit.

3. Engage if hit.

More resources here:

Free Online Reputation’s Management Beginner’s Guide by Andy Beal

Basics Of Online Reputation Management by Lee Odden

34 Online Reputations Management Tools by Andy Beal

Looks like China no longer appears as a bargain and some corporations might be tempted by mitigating the risk of their overdependence over operating in one country only.

The International Herald Tribune make a very interesting point here, not by ranking the two countries systems but by pointing out their similarities and why top Chinese policy makers have been watching the Vietnamese economic unfold : What is happening in Vietnam rings an alarm bell for China.

There is little contagion risk, as the Vietnamese economy is less than a third of the size of nearby Thailand, which triggered the 1997 Asian financial crisis.

But China and Vietnam have similar fundamental economic problems. Both face mounting inflation pressures, they have large foreign money inflows and both have been reluctant to let their currencies appreciate in recent years.

Vietnam, often referred to as little China, has followed its larger neighbor in beginning market-oriented reforms.

Like many of its Asian neighbors who want to use exports to pull out of poverty, Vietnam chose to resist currency appreciation so it could keep its costs low.

Importantly, Vietnam, unlike China, failed to soak up the funds it injected into the domestic banking system when it bought up the foreign investment inflows. The result was 54 percent credit expansion in 2007 and a current inflation level above 25 percent.

“The issues are the same, but their policies are completely different,” said James McCormack, a managing director at Fitch Ratings. “China’s response to inflation has been more aggressive and effective.”

China’s pockets are deeper. It boasts large reservoirs of domestic and foreign cash, which help it lock in excess liquidity and release it when necessary. It has $1.7 trillion in foreign reserves, the largest amount ever held by any country.

Still, the Vietnam experience is a rude awakening for China. Before the Vietnam crisis, several influential domestic experts in China had proposed that policy makers allow domestic inflation to rise to correct the undervaluation of the currency, instead of allowing the nominal exchange rate to go up.

Vietnam shows that that would have been a big mistake because inflation can do a lot of damage. Exports would be hurt because high inflation drives up the cost of doing business.

Vietnam has been so focused on rapid economic expansion that it forgot how economic overheating could sacrifice short-term growth.

By comparison, Beijing has been far more assertive in controlling liquidity.

Last week, Beijing unexpectedly lifted the bank reserve ratio, the money banks must hold in cash or on deposit, by a full percentage point to a record 17.5 percent. Many experts see this as a signal that Beijing is taking inflation more seriously.

What makes Vietnam’s currency policy even more vulnerable, the country has a fairly open capital account.

Vietnam, on the other hand, has operated a policy that pushes the dong slightly lower against the dollar each year.

Vietnam has taught Chinese leaders that negative real interest rates, an open economy and fixed currency are a “recipe for disaster,” said, Hong Liang, an economist at Goldman Sachs. No country can fix interest rates and exchange rates unless the economy is closed. Both Vietnam and China have moved to become more open and market oriented.

The lesson for China is that it needs to allow more flexibility in the yuan and to take seriously the risks posed by inflation. Otherwise, what seems like a minor headache could well turn into a policy nightmare.

I wish I could hear and read this more often and louder anyway.

Back to 2006, while giving a speech at the World Economic Forum, William Parrett, CEO at Deloitte, stressed the importance of developing new risk management strategies for corporations. He indicated that far too many companies still define the threats they face too narrowly and remain focused primarily on addressing only financial risks.

“One effect of globalization has been that risk of all kinds — not just fiscal, but also physical — have increased for businesses, no matter where they operate,” said Mr. Parrett. ”Information travels far and fast, confidentiality is difficult to maintain, markets are interdependent and events in far-flung places can have immense impact virtually anywhere in the world. A broader framework for defining and managing the variety of risks will be necessary if corporations are to mitigate the threats they face, assure sustainability and deliver value to their shareholders.”

The ongoing study of business leaders uncovered four considerations that are top of mind, as they review and upgrade security and risk management, including:

• Fostering a holistic and integrated risk management culture that features a chief security officer and that extends across the entire organization.

• Imagining the unimaginable, incorporating into risk positions the potential impact of low probability events and adding “stress test” models to risk-evaluation tools.

• Appreciating the significance of anti-Western sentiments, recognizing that corporations are on the frontlines of global influence and outreach.

• Identifying best practices as they emerge and putting in place the planning, analysis, monitoring and human resources necessary for their implementation.

“Clearly, there are additional expenses in defining risk more broadly and extending preparedness to address more possible events, but such an expenditure should be viewed as an investment that can reap great rewards when the unforeseen or unexpected happens,” he said. ”For management and boards of global corporations, risk management must now become an essential part of preserving and protecting shareholder value and thus an area where they should focus a good deal of their attention. They also need to do a better job at monitoring these intangibles.”

Being myself involved in this field of business, I don’t see much changes in corporations’ attitude toward risk since this speech was delivered to the world top executives in 2006, except maybe for a few of them operating in really harsh conditions or dangerous countries, where risk is to be taken as physical risk.

I am often advising my clients to integrate the Risk function in the company organization the same way they do for Marketing, Sales or Operations i.e. a new kind of transverse position, able to cove every aspect of the business acting on behalf of and reporting to the board, not less.

The current credit crunch conditions have given financial establishments a new and sudden awareness of the necessity of having financial Risk Managers on their payroll.

I wish it could be the same for every non-financial corporations as well, operating in sensitive business environments.

1. Impact on local communities

Who is this project harming ? What is the added value created ? How is this added value redistributed ? If you can’t provide the communities with the right answer, there are good chances you might be taught the answer the hard way, especially in a low-wages economy, following the old habit of “If you don’t give then I will take”. Don’t miss out to create a real two-ways relationship with communities and this will greatly help your project sustainability.

1. the NGOs and your Corporate Reputation

Big corporations might think they are evil but NGOs just do their job and you can’t beat them on the communication battlefield. So my advise would be don’t get them angry, involve them instead and work on your corporate reputation.

Seems that the Chinese companies are doing exactly the opposite in Cambodia…

So what’s the point ?

China, hungry for strategic influence and natural resources, is asserting itself as a major investor in Cambodia, sparking concerns that a huge inflow of Chinese cash will fuel existing corruption and exploitation in one of the world’s poorest countries.

What China is bringing at the table ?

China has become one of the biggest investors in Cambodia, with 3,016 Chinese companies making cumulative investments of US$1.58 billion to the end of 2007. Bilateral trade last year rose by 30% from 2006, to $730 million. Since the signing of an investment protection agreement in July 1996, a further $350 million has been pledged, mostly in the forestry sector, power, textiles, construction materials, and agricultural development.

Something else ?

Besides investment and assistance, China has also granted military assistance to Cambodia, providing the country’s dilapidated navy with nine patrol boats in November 2007 and five warships in 2005.

Let me guess… what it a price to pay ?

“The effect of lots of money coming in with few strings attached, going to a lot of people in the government, is generally exacerbating corruption,” Simon Taylor, director of the international anti-corruption group Global Witness, said.

“This manifests itself as land-grabbing, massive plantations and illegal logging, unregulated mining, the building of dams, and so on,” Taylor said.

Meanwhile, workers’ rights are often sidestepped in Chinese-invested factories, especially in the textile industry, activists said.

“The Chinese companies, especially garment factories, today have a lot of problems with Cambodian workers,” Chan Saveth, of the rights advocacy group Adhoc, said.

They have described an atmosphere in which they are constantly pressed into unpaid overtime, with too many financial worries and too little spare time to cause trouble for management. Unauthorized deductions from pay-packets are common, and paid sick leave is rare.

What impact on local communities ?

Chinese money has been tied up with massive agricultural and forestry exploitation projects, which are destroying traditional ways of life such as bamboo-harvesting and resin-tapping, activists said.

The Cambodian government granted a Mondulkiri forest concession of 200,000 hectares – 20 times the legal limit – acquired secretly by Pheapimex, an ethnic-Chinese owned Cambodian conglomerate with close ties to Prime Minister Hun Sen.

Pheapimex formed a joint venture with China’s Wuzhishan plantation firm to exploit the region, displacing indigenous minority people who rely on the forests for their traditional livelihoods.

Global Witness said bigger deals involving Chinese state-backed companies were likely the least transparent and the most strongly defended by government security forces, who responded with military force to anti-logging protests by villagers in Mondulkiri.

He said the outcome of such deals for people living in rural areas was disastrous. “They know nothing until the moment that the bulldozers turn up and start pushing down their houses.”

What is the government position ?

Hun Sen has banned illegal logging and called anarchic logging “the biggest mistake” of his political career, and his views have been backed up by anti-logging speeches by ministers, but with little apparent effect.

Why is China acting this way ?

Chan Sophal said China’s interests in Cambodia were clear. “They help us, but they also look into the resources we have, such as mines, oil, gold, iron, and land. They need land to grow agricultural and agro-industrial crops to meet the demands of the [China's] population.”

China wrote off significant loans to the Cambodian government six years ago, making new loans and grants worth $600 million during the visit to Cambodia of Chinese Premier Wen Jiabao in April 2006.

While no conditions were attached, analysts say Beijing is keen to secure access to the southern port of Sihanoukville for strategic reasons, particularly as a delivery point for imported oil.

This is it. Reminds me of a similar situation… Myanmar maybe ?

I will try to keep most of my posts “risk oriented” but time to time, some of them shall be related to general thoughts about Asia specificities and their consequences on business.