Too many multinationals with operations in China are not enforcing quality standards in design and right through the supply chain. The consequences are becoming painfully aware as a slew of companies announce product recalls or are embroiled in consumer-related scandals in their home markets such as the US or even Japan.

Take the case of Mattel which recalled almost 20 million toys made in China in the latter part of 2007. And 10 people in Japan have fallen ill this month after eating dumplings imported by Japan Tobacco from a Chinese food factory. There are a plethora of other cases.

With lower wages and a plentiful supply of skilled labour, China's urbanised eastern and southern provinces have been an attractive manufacturing destination for companies from around the world which then export products to third markets. There's plenty of upside but also loads of risks as many multinationals are finding, with damage caused to their reputations.

Mattel's handling of the toy recalls is a matter of some debate. However, its chairman and chief executive Bob Eckert is now saying the right thing. According to an interview in the Financial Times, Mr Eckert has expressed his view that companies need to take responsibility for their manufacturing processes:

"One of the first things we did in early August, with a major recall, we ran a letter from me to consumers that basically said 'I'm sorry'. I've got four kids. I get it...

It could always happen again. One of the things I've learned is you never say never. But we're doing everything we can to prevent it. The important thing is to catch it quickly and do something about it...

Countries don't make products; people do. The fact is most of the toys today are made in China and most of the toy manufacturing problems are in China...

But we've had manufacturing problems in other markets. So the important thing is for companies to take responsibility for their manufacturing process. I don't know that we need more government intervention."

Full marks now to Mr Eckert who can (some months after the event) eloquently communicate in a way which puts a human face on the company, takes responsibility (without shifting blame) and puts the issue in perspective. These are all essential components for effective communication when a serious issue or crisis confronts a corporation.

Here are some other reputation management suggestions for multinationals operating  in China:

• audit all your operations to ensure compliance with local Chinese laws as well as those in the markets where you are exporting

• abide bv international standards

• check all ingredients at your production centres as well as those of materials purchased from suppliers to ensure compliance as well as safety

• bring in a third party auditor to conduct checks

• be prepared for the worst to happen

• have crisis management and communications plans including ready-to-go statements in place

• be a good corporate citizen: communicate regularly with stakeholders locally and in important foreign markets. Goodwill, relationships and trust built up during good times can be invaluable when confronting a crisis and then embarking on the lonely, tough task of brand rebuilding

Hong Kong, Friday February 15 2008