To mitigate the confidentiality risks in Japan

Naoki Hanzawa, is a drama title, the most watched M&A TV series in Japan. A friend of mine who is well familiar with M&A deal commented on this drama, as some parts are really different from the reality.

His comments reminded me of confidentiality practice in Japan. We Japanese are somehow a bit less sensitive towards confidentiality concepts.

Once before, say Showa era, the confidential information used to come under such circumstances.

I will add explanations and how to mitigate each one of risk.

1 Bar casual drinking after work

My husband is Brazilian. He studied a lot about Japanese business practice in his school days in Brazil. Teachers said that clever and smart Japanese never do such silly things as we Brazilians do…However, once he’s come to Japan, he was surprised to find out a lot of Japanese drink a lot, smoke a lot, and sleep on the streets getting very drunk. “Why Japanese people…!!” He was very much astonished with the reality. Not everyone but some people like drinking and communication over drinking is somehow very important in Japan. This has still been a practice in some industries. At drinking, people tend to complain about works, jobs, clients, counterparts, and importantly small salary on their heavy workload. This has been found as an opportunity for competitors to know the secrets. The confidential information somehow leaked by piece by piece in drinking occasions. However, still, I personally feel that drinking is very important communication tool among us. I stopped drinking almost ten years ago and I have now been simply enjoying such drinking occasion to know more about our business partners.

2 Conversation at home

Like Showa era, house wives were concentrated on their works at home while husbands work hard outside from morning till night. Wives got frustrated and checked husbands’ mails or mobiles, sometimes documents. They feel relieved to know that their husbands just simply worked very hard not cheated them however, they never put importance on business context: where he went, what he did, who he met, what kind of gift he selected, etc. this is probably not only in Japan. Japanese guys also less careful about business contexts talked at home. Nowadays, companies’ compliance sections have been more cautious on that and educated more on their employees.

3 Segmented business processes in Japan

Actually, too many workers in a process under typical Japanese business structure. One manager has say 5-10 junior guys, as well as 2-3 secretaries. One set of document is handed over to a junior guy, and that junior asked a secretary to make a copy of it. Consequently, the confidential documents may be exposed to more than three persons compared to having all the info within a person. A confidential assignment should be allocated only one person and not to a team, this is the better way to keep all the information confidential.

4.Group board structure　

In Japan, the top management team is created and decide everything via meeting. Quite a few companies in Japan, except for middle to small businesses, has so-called “Top down” structure where the top management discretionally decides everything under his/ her control. Thus, the confidential information should be shared with at least the board team and the risks would be spread to surrounding persons of those board members. Thus, that might be a solution to appoint only a special team, say 2-3 person and that team has to exclusively work with that deal under the direct reporting line from the president/ CEO.

5 Paper communication

This is another tricky part. Some senior guys don’t use email communication and they prefer printing out all the mails and carry out them with files. Secretary can know the information and information is also exposed to risk of disclosure. Some legendary entrepreneur, like Mr. Inamori may educate those senior managements and encourage them to keep their confidentiality. So far, summing up the risk of confidentiality is as follows;

The items to be cared are 1 drinking communication, and 4 group board structure, I think. Therefore, for the highly sensitive business topics, non-Japanese client may select a small company where the information spread looks limited and decision making should be done only within a couple of people.

M&A deals in Japan was described in here.

Why 70% of M&A deals fail?

Further queries or doubts, please email to ytomizuka@abrilsjp.com

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