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Over the years, I have encountered verydifferent business crisis cases in China: shareholder disputes, leadership transitions, investor due diligence exercises and governance reviews.

What has consistently struck me is howoften the apparent problem turns out not to be the real one.

A sudden event may trigger a crisis. Often,however, the underlying issue has been developing quietly for years.

This perspective echoes one of the central ideas developed by Philip Chen in The Crisis Management Playbook: organizations do not become resilient when disruption occurs; disruption reveals the quality of the preparation, leadership and governance already in place. In Chen's framework, crisis management extends beyond the response itself. It encompassesfour stages: preparation and prevention before a crisis occurs, effective handling when disruption strikes, recovery of operations and stakeholder confidence, and ultimately rebuilding the organization’s capabilities and resilience for the future.

My experience in Greater China has led me to a similar conclusion: most business crises are governance issues that become visible under pressure.

The following two cases illustrate how governance issues can evolve into business crises and how foreign SMEs operating in Greater China can address them before they threaten business continuity.

When a Shareholder Dispute Revealed a Dependency Risk

The first case concerns a French family-owned group established in China for more than twenty years.

The second generation was overseeing sourcing and manufacturing activities in Asia, including China. As was common for many foreign companies entering the market at that time, the local structure included a Chinese partner who combined a shareholding position with a central operational role.

For many years, the arrangement supported the company's growth and operational development.

That equilibrium was challenged when a shareholder dispute escalated into legal proceedings.

Attention naturally turned to legal strategy and possible outcomes. The review of the situation, however,highlighted a different risk.

The local partner occupied a central position in the operating model. Key supplier relationships, historical knowledge and certain decision-making processes had gradually become concentrated around a single individual.

The legal dispute did not create that dependency. It revealed it.

Regardless of the legal proceedings,customers still expected deliveries, suppliers required engagement, employees needed direction and headquarters needed reliable information.

The immediate challenge was preserving operational continuity while reducing the organization’s exposure to a dependency it had only partially recognized.

The priority was to identify critical dependencies, rebuilt reporting mechanisms, document critical processes and establish alternative points of contact with suppliers and local teams; before those vulnerabilities could affect the business.

Looking back, the key lesson was not legal but organizational. Preserving the business was about more than winning the dispute. The company could have prevailed in court and still emerged with weakened operations, damaged relationships and reduced ability to execute. Reducing dependency therefore became as important as the legal proceedings themselves.

When Growth Exposed the Limits of the Existing GovernanceModel

The second case involved a less than tenyears, French manufacturing company operating in South China.

There was no conflict, no litigation and noimmediate threat to the business. On the contrary, the company was growing rapidly and attracting investor interest.

The company's success was beginning to expose the limits of the existing governance model.

Investor interest was growing and governance expectations were rising, yet management practices still reflected a much smaller organization.

The first frictions had already appeared. Decision-making was slowing and the business struggled to meet investor-grade governance standards.

The issue was scalability. Without significant changes, access to the funding required for the next stage of growth would beat risk. Investors were looking for clear accountability, transparent reporting, defined decision rights. The existing model was not yet able to provide that level of confidence.

The challenge was therefore to transitionfrom a management model that had successfully supported the company's earlygrowth to a governance framework capable of supporting investors and futureexpansion, while preserving the operational knowledge and relationships builtby the existing team.

Too often, governance transitions focus first on controls, approvals and reporting requirements. What leadership sees as professionalization, teams frequently experience as bureaucracy.

In this case, the discussion started with decision rights.

Which decisions belonged to local management?

Which required headquarters involvement?

Which decisions were being escalated unnecessarily?

Which had no clear owner?

Clarifying these questions helped address the growing gap between the company's ambitions and the governance model supporting them.

The Operator's Perspective

Although very different, these situations pointed to the same underlying challenge: understanding how the business functioned.

Philip Chen summarizes this with a simple idea: composure creates clarity, and clarity enables action.

Ideally, business leaders should test the organization while conditions are still favorable.

Under pressure, organizations are often tempted to accelerate decisions before they fully understand the situation. In both cases, the priority was to establish a clear operational diagnosis: where critical dependencies sat, who held essential knowledge, what required protection and which decisions could wait.

Only then could meaningful action follow.

In practice, this is often where an operating leadership role becomes essential. In both situations, the challenge was not a lack of expertise. Legal advisers, accountants, HR specialists and external consultants were already involved. The challenge was to establish a coherent course of action, align decision-making across headquarters, local management and external stakeholders, and preserve operational continuity throughout the process..

Conclusion

When engaging with boards and executive teams responsible for operations in China, discussions often begin with a triggering event: a shareholder dispute, the departure of a key executive,increasing investor requirements or shifts in the geopolitical and regulatory environment.

With hindsight, these situations serve as a reminder that an organization should not be assessed solely on its performance during periods of growth. Its strength is equally reflected in its ability to navigate transitions, preserve critical knowledge, maintain alignment between headquarters and local operations, and adapt as its environment evolves.

The organizations that navigate thesemoments most effectively are rarely the ones reacting fastest. More often, theyare the ones that have already developed a clear understanding of how theirbusiness operates, where critical knowledge resides, how decisions are made andwhere dependencies have accumulated over time.

Whether the trigger is a dispute, atransition, or a change in the operating environment, the underlying questionremains remarkably consistent:

“If the pressure increased tomorrow, whatwould it reveal?"

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