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The due-diligence pitfalls of increased globalization

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In an era where companies have partners all over the world, it's important to conduct due diligence on the people representing your brand. In a report, Deloitte Financial Advisory Services LLP notes that with no clear regulatory guidance about the minimum level of due diligence needed, companies often make a cursory effort. The report sets out three common pitfalls:

Failing to gather sufficient data: Many companies fail to collect sufficient information on their overseas partners, often relying on their own employees to complete internal documents without requiring the business partner to answer specific questions. Instead, you should create a thorough due-diligence questionnaire that obliges a business partner to attest to understanding anti-corruption regulations and controls.

Failing to verify information: You can't take the questionnaire as the gospel, and you must verify the information disclosed on it. The amount of research will depend on whether the risk of involvement with this company is high, medium or low, given the amount of dealings with government and the corruption profile of the country.

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Failing to act on red flags: Any risk factors – inconsistencies or problems – that are identified must be followed up. This may involve asking more questions of the partner or hiring an investigator. "When companies have been put on alert by adverse or conflicting information, regulators expect resolution," the report notes.

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