In the past few years, the interest for companies and investors to enter international markets and invest their money overseas has risen exponentially. International business is no longer about exporting manufactured goods, but it has turned into a more complex environment, with globally integrated value chains and business relations that go from one country to another. Whether as a manufacturer, a service provider, or an NGO, organizations have learned to deal with being international in one or other way. So too has the rate of fraud and investment scams been rising. In this context, international due diligence has never been more important to safe investment.
But international due diligence has its difficulties. Most companies and individuals are used to or at least have a basic knowledge of the domestic rules of the game. Due diligence is never a simple process, but in the domestic environment part of the process may seem lighter because we have a better understanding of what to do and where to go to search for answers. Proper due diligence in a foreign country can be very daunting for an investor or business person because of the lack of familiarity with the administrative, risk and institutions in place, not to mention the language barriers.
If you’re on the other side of the globe and have no investigation experience, chances are you’ll need the help of a professional.
International due diligence can turn particularly hard when the parties involved come from high risk countries or countries where the policies of data protection are fairly different. Such an example are China and Russia, where professional private investigators are required to investigate on a local level and no mistakes can be afforded, or else your investment may be at risk. Other countries present different challenges, like many African and Asian countries where data records do not go very far. Investors need to look for private investigators that know the local environment and laws and have a good understanding of what are acceptable practices in the country, but also understand the global reach of the investigation. Searching data alone in developed countries is not a prudent method to reduce your risk. Having a local team on the ground where you need them is critical, as trained investigators speak the language, have access to local records, and can uncover important evidence.
What would I need to get started with international due diligence?
In the first place, there is some research to do regarding the firm you are hiring for this task. International due diligence is a deep and comprehensive verification process, so you will need trained investigators on the ground and the reliability of a reputable private investigation firm that will respect your confidentiality and can handle the verification process. Wymoo®, for example, has highly trained investigators on the ground in over 100 countries, with standard due diligence investigations covering a wide scope. Points covered can include business registration and ownership information, verification of physical offices and addresses, fraud and litigation history, court and criminal records, reputation and reference checks, verification of operations and size, verification of documents, identity check, screening the case for fraud, and more. In some cases, investigators may even conduct surveillance to verify physical offices or facilities, and obtain bank records and check for assets on the company.
You will also need all the basic information. A good due diligence process depends on the quality and quantity you have from the initial information. You will need to know who your counterparty is. Request as much information as you can from the business where you are investing your money (name, address, business license, who is the legal authority, shareholders, market information, insurance, etc). The more information you can get, the more investigators can verify and investigate. It should be seen as a critical warning and a major red flag if a company is not willing to provide information. After all, you or your company will be investing in it, so information is the least you will need.
There has been a significant rise in fictitious or fraudulent companies being listed on major stock exchanges around the world, so don’t make the mistake of assuming it is safe just because it is publicly traded. And there are no shortage of criminals assuming a false identity, so consider the fact that the person you are communicating with may not be the representative he or she claims to be.
Bad decisions are the consequence of not having the right information, or having none at all. Bad information can lead to bad decisions. Clear evidence and verification of the facts can lead to a better investment. Do not worry if you are not an expert in how to conduct international due diligence. Hiring an expert is the smartest way to invest! We can help you lower your risk in a high risk world.
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© Copyright 2015 Wymoo International. All Rights Reserved. This content is the property of Wymoo International, LLC and is protected by United States of America and international copyright laws. Wymoo® is a registered trademark.