Risk management: identification of affiliated operations

As a common business model, although affiliated operation provides convenience for market entities with insufficient qualifications in the short term, it also brings many compliance risks, such as unclear main responsibilities, chaotic financial accounting, and lack of legal compliance. From the perspective of risk management, this article delves into the identification methods and management strategies of affiliated operations, hoping to help everyone.

1. Introduction: The nature of risks and the necessity of management of affiliated operations

As a business model of “backdoor eggs”, although affiliated operation can provide short-term convenience for market entities with insufficient qualifications, it brings huge compliance risks to enterprises.

From quality and safety accidents in the field of construction engineering to the risk of false invoicing in the field of finance and taxation, affiliated operations are often accompanied by problems such as unclear main responsibilities, chaotic financial accounting, and lack of legal compliance. For enterprises, establishing a scientific and systematic affiliated business identification mechanism is the core link to prevent legal risks, maintain brand reputation, and ensure operational safety.

This paper will build an operable risk management system from four levels: management framework construction, core identification dimensions, identification methods and tools, and implementation strategy.

2. Build a management framework for affiliated business identification

(1) Clarify management objectives and responsible entities

Goal-oriented

Through the whole process identification, we will eliminate violations such as “raising shells with certificates” and “renting out qualifications”, and ensure that the business entity and the qualification entity are consistent, and the business substance and legal form are unified.

Responsibility matrix

Set up a cross-departmental special team, led by the risk control and compliance department, and jointly integrate finance, human resources, business departments and project management teams to clarify the responsibilities of each link (such as the finance department is responsible for the review of capital flow, and the human resources department is responsible for the verification of labor relations).

(2) Establish a full-cycle management process

1. Proactive prevention:In the stage of business cooperation and project undertaking, filter risks through qualification verification, background checks and other means;
2. In-process monitoring:During the project execution process, identify abnormalities through financial data tracking and on-site management spot checks;
3. Looking back after the fact:Regularly conduct compliance audits on completed projects to review risk vulnerabilities.

3. The five core dimensions and operational points of affiliated business identification

(1) Identification of consistency between qualifications and subjects

Core logic: Qualification is the basis of business legality, and the separation between the actual subject and the qualification subject is a typical feature of affiliated operation.

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Operational points：

1. Qualification penetration verification:Verify the qualification certificates required for the business to confirm whether the certificate registration entity is consistent with the contract signing entity and the project seal user; Focus on the phenomenon of “high-quality undertaking and low-qualification construction”.
2. Business scope matching analysis:Compare the actual business of the enterprise with the scope of business licenses and qualification certificates, and be wary of operating beyond the scope and relying on third-party qualifications.

(2) Abnormal identification of financial and capital flows

Core logic: The financial characteristics of affiliated operations are “two sets of accounts” and “extracorporeal circulation”, and the capital flow is disconnected from the business flow.

Operational points：

1. Closed-loop tracking of funds:Establish a three-in-one verification mechanism of “contract-fund-invoice”, focusing on whether the funds flow directly to non-contractual entities and whether the project costs are independently borne by the affiliated party.
2. Tax Compliance Review:Check whether the invoice issuance is “consistent with the three streams”, analyze the financial treatment of management fees, and be wary of invoicing on behalf of invoices and inflated costs.

(3) Penetrating identification of personnel and labor relations

Core logic: The independence of personnel management is the key to judging whether it constitutes real employment, and the personnel in the affiliated operation are often recruited by the actual controller and have no substantive relationship with the affiliated party.

Operational points：

1. Labor Relations “Three Certificates in One” Verification:Personnel in key positions of the project are required to provide labor contracts, social security payment records, and salary payment flows, and confirm that all three point to the affiliated party; Judge the actual ownership of personnel through attendance records, work report paths, etc.
2. Administrative permission penetration analysis:Examine the actual control of the affiliated party over the project, such as whether it participates in core management links such as construction organization design and quality and safety inspection, and whether the project seal and financial seal are uniformly managed by the affiliated party.

(4) Deconstruction of contract and agreement terms

Core logic: Affiliated cooperation agreements usually contain “backdoor” clauses, which need to be analyzed through legal texts to lock in risks.

Operational points：

1. Comparison between contract subjects and performance subjects:Review whether the contract header and payment are consistent with the actual performing party, and pay attention to the risk of “yin and yang contract”.
2. Substantive review of rights and obligations:If there are expressions in the agreement such as “Party B (affiliated party) independently bears the profits and losses of the project” or “Party A (the affiliated party) does not participate in the actual management”, it can basically be recognized as affiliated operation.

(5) On-site verification of business scenarios

Core logic: The independent operation scenario that is separated from the resource support of the affiliated party is an important external manifestation of the affiliated operation.

Operational points：

1. Site and equipment ownership investigation:Check the business site lease agreement, equipment purchase invoice and other documents to confirm whether the ownership belongs to the affiliated party; Check whether the equipment logo, employee badge and other details are consistent with the brand of the affiliated party.
2. Business Process Traceability:Trace the whole process of the project to see whether the key nodes are dominated by the affiliated party or only “borrowed” for the affiliated party.

4. Identification methods and tools for affiliated operations

(1) Document verification method: the whole chain from qualification to agreement penetration

Applicable scenarios: Business access stage, before contract signing, project audit link

Operating tools: By verifying qualification certificates, business licenses, contract agreements, financial vouchers and other documents, identify risk points such as expired qualifications, unrelated entities, agreements containing sensitive clauses, abnormal capital flow, and suspicious labor relations.

example: When a construction enterprise undertakes a project, the qualification level does not match the scale of the project, and the supplementary agreement stipulates that “the actual constructor bears all safety responsibilities”, which can be preliminarily determined to be affiliated operation.

(2) On-site survey method: restore the real scene of business activities

Applicable scenarios: During project implementation, annual compliance inspection, risk early warning response

Operational points: Through the “four checks and one look” (check personnel, equipment, data, system, and management) workflow, combined with the mobile inspection APP to upload on-site photos in real time, compare work cards, equipment identification and other information, and identify abnormalities in personnel ownership, equipment ownership, management processes, etc.

(3) Data analysis method: use digital means to capture risk signals

Applicable scenarios: Normalized risk monitoring and cross-project risk comparison

Core model：

1. Abnormal Fund Flow Model:Set the “public-to-private early warning threshold”, analyze the level of the capital chain, and identify abnormal transfers and extracorporeal circulation of funds.
2. Personnel activity model:Count the number of attendance days of employees, compare the number of managed projects per capita in the same industry, and identify the phenomenon of “hanging”.
3. Business concentration model:Calculate the proportion of revenue from a single project and identify abnormal business concentration risks.
4. Technical tools: Introduce RPA robots, Python scripts, etc., to build a relationship graph and visually display the personnel, funds, and business correlation between entities.

(4) Interview penetration method: obtain real information from stakeholders

Applicable scenarios: The initial stage of risk doubts and cross-departmental joint investigation

Interview strategy: Design core issues for different objects such as affiliated management, project site personnel, suppliers/subcontractors, contractors/customers, etc., follow the principle of “cross-verification” to obtain real information and identify risks such as lack of management and misalignment of the subject.

5. Implementation strategy for affiliated business identification

(1) Digital tool empowerment

Build a “qualification-finance-personnel” data center, introduce blockchain certificate storage technology, and use digital tools to automate and intelligence qualification verification, fund analysis, on-site inspection and other links, and improve identification efficiency and accuracy.

(2) Preparation of standardized operation manuals

Formulate the “Guidelines for the Identification of Affiliated Operations”, design standardized verification forms, clarify the operation steps and evidence retention requirements of each department, and lower the implementation threshold for grassroots personnel.

(3) Risk early warning and emergency response

Establish a risk level assessment mechanism and manage projects in red, yellow and green levels; Formulate emergency plans, clarify the disposal process after confirmation of violations, and resolve risks in a timely manner.

(4) Long-term training and cultural construction

Regularly organize case training, incorporate the identification of affiliated operations into performance appraisal, and form a compliance culture with full participation, shifting from “passive prevention” to “active governance”.

6. Conclusion: From “Passive Prevention” to “Active Governance”

Affiliated business identification is a comprehensive embodiment of corporate governance capabilities. By building a four-dimensional management system of “system + process + tool + culture”, enterprises can shift the risk prevention and control of affiliated operations from “fire fighting after the fact” to “prevention in advance”, and upgrade from “single point inspection” to “system governance”.

In the future, it is necessary to continue to iterate the identification model, incorporate affiliated business risks into the comprehensive risk management framework, and build a solid bottom line for high-quality development.

Enterprises can flexibly use the identification dimensions, methods and strategies in the article based on industry characteristics and their own management foundation, and if they need to further refine the implementation details of a certain link, they can inform the specific needs at any time.