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More Reasons to Do Your International Due Diligence

More Reasons to Do Your International Due Diligence

For companies that operate in several countries, or those who hire, outsource or have business deals overseas, getting international due diligence is a necessity.  Ignoring the risk may work for a while, but eventually your luck will run out.  Due diligence is no longer one of those good practices that help companies do better, it is a must no one can avoid, especially those who want to continue in business!! Bad press, lawsuits and criminal charges, not to mention bankruptcy, are just a few of the potential disasters a company can encounter when it does business with unverified individuals, companies and websites overseas.  Individuals can lose everything, when rushing into an investment overseas they fail to verify.  It is no secret that there are still corporate executives that consider it unnecessary, but here are some of the reasons why you will be glad you are not one of them:

Data Breaches
The year 2014 will be recorded in history as the data breach year. Major websites were hacked, from big retail companies, health, insurance, financial organizations to government websites; all of them were hacked during this year. Stealing personal information is one of the most lucrative activities nowadays, so in this field it is very possible that things will get worse.

Getting prepared for a cyber-attack goes a lot further than buying expensive security software. It actually involves a long chain of good practices that includes hiring the right people, making sure the company that is hired to put in place the security system is reputable, getting reference checks, screening for fraud, etc. Most of the mistakes that led to these major data breaches had to do with human mistakes and not to fancy or complicated malware, so the best practice is to check those who are involved in the deal.  Make sure you’re investing or doing business with a company or individual who is competent and reputable, and who they claim to be.

Human Rights
For today’s consumers, human rights are extremely important. We all know that in a globalized world companies seek out the best opportunities, and sometimes these opportunities are located somewhere else in the world. The workforce is less expensive in certain countries, like China, and the resources, infrastructure, education and political context might be different than what you’re used to.  But it is also known that in today´s world consumers do not tolerate human rights violations anymore.  Bad press leads to bad business and fewer profits.  Consumers are not buying anymore from companies that they know have terrible working conditions in other countries, or those who hire children and pay miserable salaries, or those who pollute water and air on a big scale.

There are thousands of companies with great practices at home, but whose providers belong to the nasty list. No one wants to be involved with unethical companies, so this is one important thing to watch for in 2015.  Be sure to speak to a professional investigator about how to verify a company’s reputation, and make sure the owners or managers have no history of litigation.

Corruption, bribery and money laundering are big words, but unfortunately they are part of our daily life today. Every time a company gets into a new business deal, whether it is an M&A, hiring a new provider or turning into another company´s provider or supplier overseas, the risks of being involved in some kind of corrupt circle is very high. Companies who have hired a reputable investigation company to verify there are no risks of being involved in a corruption case are definitely safer. Being somehow related to these kind of offenses is not only a reputation problem, it may also bring serious legal consequences. The Foreign Corrupt Practices Act (FCPA) was put in place to avoid corruption on foreign contracts, and companies could be taken out of business for not doing their homework and getting due diligence done properly.

Thinking of investing in China, Russia, Malaysia, Brazil, Pakistan or other developing countries?  Do you speak the language?  Do you have reliable contacts in the country to verify the company is reputable?  How do you know the offices, assets and customers exist?  For proper verification, you’re going to take advantage of a reputable private investigation company with trained investigators on the ground.  Wymoo, for example, has professional investigators on the ground in over 100 countries.  We speak the language and we have access to local records.

Ties to Terrorism
Employment screening when hiring someone new is extremely important, but so it has become due diligence and investigations on regular employees too. Identifying and preventing any insider threats is every day more important. During 2014 there were several examples of how extremists and Muslim militants take their cause to harming others.  If for any reason a company or funds end up being associated with terrorism, the consequences can be severe.  If you do business or invest or hire in the Middle East, you are at an especially high risk and it’s important to verify.  The last thing a company wants it to get tied up with bad money.

No company is immune from this kind of risk, but it´s the company´s responsibility to make sure that there is a safe environment for every employee. The beheading case in Oklahoma was one good example of why companies need to have investigations in place and monitor what is going on, especially if there are red flags.   Getting the facts and evidence in the beginning is a wise investment, and what keeps you safe down the road.

Are you planning to invest or hires overseas?  Contact us today!

C. Wright
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