In the face of expanding regulatory landscapes and mounting pressures, legal and compliance professionals are aiming for a “business-oriented mindset, emphasizing not just adherence to regulations but alignment with unique business situations.
In the stringent regulatory landscapes of the finance and biotech sectors, examining how companies navigate compliance provides valuable insights that extend beyond these industries, offering a broader understanding of corporate compliance practices across various sectors. ALB recently spoke with Tong Chao, head of compliance management and general manager of the legal and compliance team at Zhejiang Orient Financial Holdings Group, and Richard Li, chief legal officer at I-Mab, with the aim of understanding their current focus on compliance, how they use innovative thinking to create a practical and effective compliance system, and how they interact with external lawyers in the field of compliance.
Faced with increasing regulatory pressures and the ever-expanding scope of corporate compliance, what approach should be taken for corporate compliance work? Both Tong and Li suggest a “business-oriented” approach.
Tong tells ALB that Zhejiang Ori-ent Financial, as the only state-owned listed financial holding group in Zhejiang Province, deals with complex external regulations, including state-owned asset supervision, compliance for listed companies, and various financial and quasi-financial business regulations. “Therefore, the sectors our compliance management system needs to focus on can be divided into these three major categories.”
Moreover, it is necessary to consider the different business sectors of the group, such as trust, futures, insurance, financial leasing, equity investment, and wealth management, and build corresponding compliance systems.
I-Mab has adopted a similar approach to building its compliance system. “A major characteristic of the biotech industry is facing almost the strictest regulatory compliance requirements that span the entire product development lifecycle. Therefore, most biotech companies also build their compliance work systems based on such a product lifecycle regulatory process,” Li tells ALB.
Specifically, the early R&D phase of biotech products corresponds to Good Laboratory Practice (GLP) standards; the clinical trial phase follows Good Clinical Practice (GCP) standards; the drug approval process faces regulatory oversight from drug administration authorities and adheres to Good Regulatory Practice (GRP) standards; after the product is marketed, it must comply with Good Manufacturing Practice (GMP) standards to ensure that all involved enterprises meet regulatory requirements.
Then, in the product sales and distribution phase, there are Good Service Practice (GSP) standards; even after products are marketed, there is strict ongoing supervision, requiring companies to continue providing Phase IV clinical data or continuously report adverse reactions. This interlinked regulatory process establishes a basic logical framework for the compliance work of biotech companies.
Over the past few years, the scope of the term “compliance” has continually expanded, and correspondingly, the workload of corporate legal and compliance teams has also increased.
Tong believes this can be understood from two perspectives: “On one hand, it is determined by the nature of compliance management, which can involve various aspects of company operations and inherently has a broad applicability; on the other hand, as various compliance risk incidents come to light, the importance of compliance management is increasingly emphasized, inevitably leading to an expanding coverage of compliance management.”
Li interprets this change from a more macroscopic perspective. “In recent years, a major trend has emerged in major judicial jurisdictions around the world, namely legislation and regulation are adapting more rapidly to changes in business practices. New regulations often follow within a year, or even a few months, after a new business model emerges. Moreover, policies and regulations are becoming more detailed, including many specific operational provisions, which lead to increasing regulatory challenges for enterprises. This, in turn, requires more time, money, and talent resources to be focused on compliance work.”
In his view, this is both an opportunity and a challenge for corporate compliance personnel. “The challenge lies in the increasing complexity of compliance work and the internal pressure on compliance teams to learn and research new policies, regulations, and practices. On the other hand, it’s a great opportunity. After more than a decade of development, the legal and compliance teams of some private and state-owned enterprises in China are taking on more responsibilities. For instance, many companies require the legal and compliance team to attend senior man-agement meetings and provide opinions on company development issues from a compliance perspective.”
INNOVATIVE THINKING
The two interviewees agree that innovative thinking is crucial for effective corporate compliance.
Tong shares the innovative practices at Zhejiang Orient. He says, “In building a compliance management system, it is important first to clarify the management logic and second to introduce scientific methods. We have achieved innovation in some specific operational measures.”
He cites the example of the so-called “three lists” compliance management method – including a compliance responsibility list, a process control list, and a compliance risk identification list. “Firstly, the identification of compliance risks is based on the clarity of compliance responsibilities and processes. We innovatively aligned responsibilities, processes, and risk points, facilitating simultaneous standardization and adjustment.”
“Secondly, we adopted the ‘Less is more’ business philosophy. For example, we standardized the definition of responsibility types into seven major ones and used a standardized ticking method to define internal and external compliance risk categories and levels. This approach allows for rapid and clear delineation of specific compliance risks, helping the compliance management team to respond efficiently,” shares Tong.
Li, on the other hand, emphasizes the importance of tool innovation, especially in the AI era, and the potential impact of new technological tools on compliance work. “We have been following the development of Microsoft’s Copilot service. In mid-January, Microsoft launched the personal edition of Copilot Pro subscription service, embedding AI technology into Office tools, significantly improving the work efficiency of knowledge and text workers,” he says.
EXTERNAL SUPPORT
With compliance becoming a key focus for enterprises, in recent years, more and more law firms have been seeking to seize this blue ocean opportunity by establishing specialized compliance departments. So, in practice, how do corporate compliance teams collaborate with external lawyers?
Li explains that at I-Mab, the legal and compliance team mainly collaborates with external lawyers when new legal systems are implemented. “For example, the field of data compliance is relatively new, and the system is quite complex. Our team particularly needs external lawyers to assist in benchmarking work, which involves understanding the compliance standards of other companies in the same industry to ensure we are neither behind nor ahead.” Addressing this issue, Tong states that a distinctive feature of Zhejiang Orient’s compliance management system construction is “self-reliance”: “Throughout the system’s construction process, all systems and guidance were independently drafted without the assistance of external support.”
“Of course, during the operation of the compliance management system, the professional support of external lawyers is very important for special matters such as compliance audits of major projects and compliance investigations in important areas. Lawyers with rich experience in trusts, futures, insurance, financial leasing, funds, and other business areas are needed to provide professional and effective services. Therefore, in 2023, our group company built for the first time a law firm panel, achieving the sharing of professional legal resources within the group,” he shares.
