Crown Casino case shows China business shouldn't be a roll of the dice

It is always nice to be proven right, even if that proof comes nearly four years later.

Back in 2016 - on 18 October 2016 to be precise - one week after the arrest of Crown Casino executives in China I had written in The Australian Financial Review that it was hard to believe Crown had failed to read the tea leaves and cease their gambling tourism marketing efforts in mainland China. Here's a quote from the article Crown detention shows how foolish the "everyone does it" excuse is in China:

"The arrest of the 18 Crown Casino executives in China last week might well be another a point in case of similarly over-enthusiastic marketing efforts. There was sufficient evidence to suggest they should have curbed their enthusiasm. To start with, as has now been widely reported in the Australian media, a South Korean casino operator had some 40 of its executives arrested in a similar operation by Chinese police last year; and Las Vegas casino operators pared back their activities for fear of attracting the ire of Chinese authorities some years ago."

As it transpires, the then Chairman-designate of Crown Resorts, Robert Rankin, had warned the company of the risks of continuing to market their casino businesses to Chinese high rollers, in part because of the arrests of the South Korean casino operator's staff. Rankin was not a member of the Crown board as yet but took it upon himself to bring his concerns to the attention of Crown Resorts then CEO, Rowen Craigie. But Rankin's advise was not passed on to the company's Risk Management Committee. The revelation was made at a public inquiry into the events that led up to the arrest of the Crown executives in China and was reported in today's The Australian.

What can I say? Indeed, I am speechless at this failure on the part of the organisation to inform the Risk Management Committee of such an important risk issue that was raised by the incoming Chair. Talk about a breakdown in systems and processes. You'd think alarm bells would have been ringing in the heads of those who decided against taking the matter to the Risk Management Committee.

I have always held the view that companies are usually aware of simmering issues that could become full-blown crises long before they blow up. But somewhere along the way some senior executive or other makes a judgment call that the unfolding issue will either disappear or will be quashed long before it becomes a full-blown crisis. Or, they might think we've been doing it for years and there's never been a problem before. Invariably they are wrong.

There's an old saying that you can legislate against everything except stupidity. In the world of crisis management you can develop systems, processes and manuals for everything but you still need to be able to deal with human nature, human error and bad judgment. But that might be a blog post for another day.

Fortunately for the Crown executives detained in China in 2016 Australia-China relations were in much better shape than is currently the case. The staff involved in the affair, including three Australians, were sentenced to between nine and 10 months imprisonment. The Australians returned home after serving their sentences. I cannot help but wonder what the sentences would have been had this situation occurred today with the bilateral relationship in such a parlous state. It must be remembered there is no separation of powers in China; it's judiciary is under the authority of the government and the Communist Party of China and sentences are often determinned for political reasons.

In recent months, due to tensions in the bilateral relationship, China has introduced tariffs on Australian barley, which it claims is being dumped on China, suspended export approvals for four abbatoirs, and commenced an investigation into possible dumping of Australian wine on the China market (announced yesterday). And, an Australian charged with drug trafficking was sentenced to death in June.

Clearly, this is not the time to roll the dice on how you conduct your business in China. Now, more than ever, companies need to play by the book when doing business in China.