Business travel in China is booming, overtaking the United States as the number one business travel market in the world, according to recent findings by the Global Business Travel Association Foundation.
A further report unveiled in October 2017, the CITS American Express Global Business Travel 2017 China Business Travel survey, revealed that 31 per cent of Chinese companies expect travel budgets to rise over the next twelve months.
China’s growing stake in the business travel market is highlighting the need for effective spend management strategies, to help mitigate risk and optimise ROI. Belinda Doery, regional director, American Express Meetings & Events, says a first step towards implementing financial controls is to gain transparency in all dealings through documentation and records of all events and attendees. Performing sufficient due diligence on suppliers is also essential to alleviate concerns regarding fraudulent activity.
“Introducing appropriate financial controls will ultimately reduce company risk exposure,” she says. “Instituting a policy that all meetings-related travel and expense claims above a certain amount must be approved through a meetings request process can prove beneficial. Eliminating the use of cash wherever possible and requiring original receipts for all transactions can also improve financial transparency.”
Companies must also understand what the risks are and put basic steps in place to tackle the challenges.
“The most common risks are associated with bribery and kickbacks, which can involve luxurious rewards disguised as ‘business conferences’, as well as third and fourth-party money funnelling which is commonly associated with lump sum invoices lacking itemisation and transparency,” says Doery. “Fake activities and fraudulent receipts are another area where companies can fall prey to without appropriate compliance systems and policies in place.”
Once the basics have been identified, Doery advises creating formal processes around the more complex aspects associated with managing meetings. Examples of these include comprehensive third-party oversight and monitoring; business self-tests; robust cash management and internal and external audit reviews.
Cindy Fisher, senior vice president and global head, CWT Meetings & Events, says the China business travel market is embracing strategic meetings management (SMM), with the agency experiencing an increase in clients implementing such an approach. She also advises ensuring that third-party suppliers have passed a due diligence process to become a partner supplier within the SMM programme, and that they are accountable for other providers to follow fair and ethical business practices.
“E-sourcing is becoming more of a market norm and ensures hotels are transparent, supports optimisation of spend, and mitigates compliance risks,” she adds. “One strategy is regular audits of meeting spend and supplier invoices to identify any high risk areas where attendees or suppliers may take advantage of company paid benefits at an event.”
To optimise return on investment, it is also key to understand the way in which supplier individual invoicing works.
“This may identify hidden costs and non-compliant behaviors within supplier invoices,” says Fisher. “Ensure that on-site support knows the attendees and these attendees are truly consuming what you are paying for at a meeting or event. When hosting meetings with high regulatory compliance visibility, ensure that your supplier knows and understands all local, regional, and global requirements for attendance and tracking at all events.”
For Dionne Holder, managing director of China at FreemanXP, good communication with clients is vital.
“If we can be with them from the strategic phase and help them plan the event or the brand activation as opposed to just being the logistics partner, that is essentially the best way to mitigate any risks; we are with them from the start to understand the goals and ROI that they are expecting,” she says.
Flexibility is also key—as Holder outlines, clients needs do change and it’s important to ensure agency teams understand this as well. As an example, the agency had been working on a large-scale activation for a client for several months and had to make some last-minute changes.
“One month before the scheduled date, the government announced the timing of the 19th National Congress of the Communist Party of China,” explains Holder. “We had to change the date and the venue, then inform all the key stakeholders and participants. We had been working with the client from the beginning on this event and were able to choose a last-minute venue for them that met their requirements and that of their audience.”
With regards to events in specific industries, such as those in the pharmaceutical sector, Robbie Gu, corporate division deputy director at MCI Shanghai says Chinese pharma companies tend to be more sensitive about words used with regards to their events, such as ‘scenic spots’ and ‘luxury’, with all suppliers having to avoid these in order to keep in line with compliance.
One further trend Gu is observing is that on-the-spot auditing is happening on a more frequent basis. “Compliance departments appear on site without notifying anyone, checking the bill and related data to make sure everything is on the right track,” he says.