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Key strategies to mitigate effect of illegal IT use - EY - China

New rules and regulations on IT and fair competition

Key strategies to mitigate effect of illegal IT use

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Figure 10: Benefits for a manufacturer who complies with the new IT rules

Source: AmCham India; EY analysis

Strategies that can be employed at a country-wide (national) level include ensuring greater enforcement of IP rights, introducing new educational initiatives to discourage the use of illegal IT.

The impact of the legislation on legal IT and fair competition varies depending on the stakeholder, and the possible strategies in which to address the impact would thus differ.

Regardless of the stakeholder, there are two central strategies that can be employed to address the possible impacts:

  • Compliance – ensuring compliance through various measures, ranging from the co-operative to the adversarial
  • Education – changing mindsets to understand that the use of illegal IT has a greater impact on the marketplace as a whole, and that fair competition is an important trait of any economy

Here are some strategies that countries and companies can employ to deal with the potential impact of legislation on legal IT and fair competition:

Strategic options at the national level

While it may be challenging to derive the potential negative financial impact on trade between countries as a result of laws similar to the UCA, it is important that countries with large manufacturing export industries implement strategies to address the possible negative effect.

Strategies targeted at the root of the problem (i.e., the use of illegal IT) are expected
to be long-term in nature, and hence have less of a short-term impact. These strategies and initiatives will revolve around compliance and education.

Strategies that can be employed at a country-wide (national) level include:

  • Greater enforcement of IP rights: Increased enforcement can take several forms, depending on the country. For example, increased raids or routine inspections, stiffer penalties for infringing parties, the set up of specialised departments to deal with legal IT use, etc.
  • Programmes to incentivize the population: Programs could include those that encourage whistleblowers to come forward with information on the use of illegal IT at their workplace (e.g., via incentives and rewards), or tax breaks or rebates for companies that can show proof of use of legal IT throughout their business operations.
  • Alternative options to consider: In countries where the cost of legal software licenses is a barrier of entry to the marketplace for companies, in particular for small- and medium-sized enterprises (SMEs), the government or relevant industry association could perhaps work with IT companies to develop country-specific pricing so as to encourage legal IT use. Additionally, industry associations could suggest other options such as using alternative platforms and/or services, using solutions produced by the domestic market (which are typically more affordable), etc.
  • Introduce new educational initiatives: Educational initiatives targeted at industries should address and discourage the use of illegal IT in business operations, highlighting the trade impact for both the country and the company in question. Inculcate the importance of IP rights and the use of legal IT both at home, in the school or at the workplace.

Strategies that can be employed within a company

  • Be proactive in ensuring compliance of existing and future IT systems – for example, by working with IT consulting firms with relevant compliance expertise
  • Obtain certification from an internationally-recognised certification board (or certification provider) to show compliance or legality of existing IT
  • Ensure contracts with external parties include indemnity clauses that clearly state that legal IT should be used in the partners’ business operations, thereby reducing the risk of future business disruptions due to legal action resulting from the use of illegal IT down the company’s supply chain
  • Provide education within the company on the importance of complying with such legislation, and the adverse effect on business operations otherwise
  • Employ a combination of the above strategies, or other strategies that have not been specifically discussed here

The overarching strategy that a company can employ to deal with the potential impact of the new IT rules and regulations would be to ensure compliance.

There are many benefits to compliance
(See Figure 10).

 

 

 

 


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  • Stephen Y. Lo 
    Asia Pacific Technology and Telecommunications Industry
    Advisory Leader
    +86 10 5815 2837
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    Advisory Partner
    +86 10 5815 2321
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    +86 21 2228 2252
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