Global Risk and Compliance: Q&A with Katherine Peavy


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CREATe is delighted to announce the addition of Katherine Peavy to our team of experts. Katherine is a global compliance executive with more than 15 years’ experience in China managing multicultural teams to implement compliance programs and complete corruption investigations, most recently for Wal-Mart. Fluent in Mandarin Chinese, she is a specialist in corporate investigations (CFE), compliance, due diligence and supply chain security compliance (C-TPAT), and is also versed in brand protection, ethical sourcing/labor standards (SA8000) and ethics.

In this Q&A, we ask Katherine about her work in China, the changing compliance landscape and joining the CREATe team.

Tell us about your role as senior director of Wal-Mart Global Sourcing.

This was a great role because most people only know about the front side of Wal-Mart – the stores. I realized that customers and store associates aren’t aware of the great amount of planning, effort and processes that go into buying such a huge amount of merchandise. For me, becoming familiar with the huge number of SKUs and different types of production facilities all over the world was both challenging and rewarding.

Part of my team was responsible for implementing the supply chain security program in support of the Customs-Trade Partnership Against Terrorism (C-TPAT), a U.S. Customs and Border Protection program. We started working with suppliers and their factories often at the very early stages where many of them had little knowledge of security or management systems. Through a combination of onsite training, seminars, and audits, most factories were able to establish very solid security programs.

The other part of my team was corporate investigations. Apart from investigations, we also did supplier and internal training on anti-corruption. We were able to gain trust and transparency with the suppliers and teams we worked with, and certainly helped to increase knowledge in that area.

You were in China from 1998-2012, during that time, what changes did you see in global supply chain management?

Where to start!? I guess the biggest changes were in ownership. When I first got there, most factories were Sino-foreign joint ventures, the old state-owned factories were all going bankrupt or being sold off. Then, around the mid 2000s, 100% domestically owned factories started to export to foreign companies with little to no input from a foreign partner. They became competitive on their own. Now, of course, many Chinese brands are establishing production facilities in more developed countries and buying foreign brands to produce in China for global markets. The automotive industry seems to have had the most significant changes.

From a compliance perspective, China’s manufacturers have started to establish compliance programs for the safety of customers and reputation of their brands. There have been challenges in China with contaminated goods and food, and counterfeit toys and furniture of low quality, which has had tragic consequences. Of course, there is still a long road to go, but it does feel like the tide has turned.

What are the greatest challenges when working with suppliers on compliance? You have managed programs that have achieved a 95% supplier compliance rate – what are the keys to this success?

With any compliance program in any organization, the full ownership of the program by senior management and middle management is key. There are examples that in an economic downturn hundreds of factories go bankrupt within a few months because they often don’t have management processes in place. Once they have seen how compliance can drive efficiencies and save money, they have an “Aha” moment and see it all as a competitive advantage, but at first sight, many compliance initiatives can be intimidating and time consuming.

You have also worked with financial firms on conducting pre-transaction due diligence. How did IP protection and anti-corruption factor into these investigations?
In Asia, most investors are worried about corruption above anything else. The hidden surprise of fraud is not fun to find after an investment or IPO. In pre-transaction due diligence, the key is to find any indications, any red flags, and deal with those in advance.

IP is often more important in joint venture or contract manufacturing situations. It takes time to build up trust between the parties in this scenario. Due diligence can be the first step in building a relationship and getting to know partners. If a partner has a history of abusing intellectual property then it is hard to build a beneficial business with them.

How do you think Chinese companies will respond to the idea of adding IP protection and anti-corruption to their overall compliance programs?

It depends on the leadership of senior management. I think China’s current anti-corruption drive is top of mind for companies. Preventing corruption and protecting intellectual property are key to quality, reputation and secure finances. That’s the reason so many of the top Chinese companies are paying attention to these issues and taking steps, like implementing management systems that support anti-corruption and IP. It makes them more competitive in the market.

Do you see multinational retailers and brands paying more attention to IP protection in their supply chain?

IP protection in China has always been an important issue. The methods for misusing intellectual property have changed over the years, but the methods for preventing that misuse have changed as well. One of the recent changes has been brands and retailers involving the broader supply chain members in IP protection as partners, rather than seeing them as adversaries.

This is a real and positive change for the supply chain that will benefit companies and their employees. Improving management systems throughout the supply chain is turning the old way of working on its head. This will be an interesting dynamic for the future.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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About Editorial Team

Editorial Team

The SupplyChains Magazine editorial team takes great pride in bringing you the best information to help you succeed in your supply chain, logistics or procurement functions. Together, our editors and contributors have more than 50 years of supply chain industry knowledge to share with you.

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