When Should You Order a Due Diligence Report?

A Due Diligence report from Global Backgrounds provides our customers with the peace of mind that they are making sound decisions based on all available information.  Our reports provide valuable information in many different situations.   The following are four examples of when a report would be useful.  These examples easily extrapolate into hundreds of potential uses for ordering a Due Diligence report, which are available worldwide on both individuals and businesses.

Example #1. When making an investment or entering into a partnership

Example customer: Individual making the investment

Due Diligence subject: Investment recipient, both the entity and the principles. 

Why: Is the business as represented? Are there any hidden liabilities? Are the decision makers trustworthy?  Is the key talent trustworthy?

Example: You are an investor and have been presented with what appears to be a great opportunity to invest in a business.  If, through our due diligence report, you found out that the business had civil judgments against it for unpaid taxes and the principle had previously been convicted of "theft by check" for over $20,000, how would that change your investment decision?  

Example #2. When hiring talent that will have access to sensitive information

Example customer: Director Human Resource / Hiring Manager

Due Diligence subject: New employee that will have access to sensitive information and/or financial accounts for the firm and/or customers

Why: Are they trustworthy? Do they have a history of activity that suggest misuse of information, access to information, or access to company financial accounts?  Do the qualifications the applicant listed on the resume check out?

Example:  The current CFO is retiring and the chosen candidate to replace her has great credentials and is friendly with the CEO.  The candidate is offered the job, subject to board approval.  As the Director of Human Resources, you are responsible for vetting the candidates credentials and preparing the proposal and recommendation to the board. What if, through our Due Diligence report, you found out that the candidate's claim of an MBA from Harvard was false and that instead of earning an MBA, he actually spent time in Federal prison on drug charges.  How would that information change your recommendation to the board?

Example #3. When providing financing

Example customer: Individual or business lending money

Due Diligence subject: Debtor

Why:  You're extending a significant amount of credit.  In order to make the return you intended, you need to be paid timely and in full.  Is there anything in the debtor's past that may indicate that the loan won't be paid as agreed?

Example:  You are providing working capital financing to a business.  If, through our due diligence report, you found out that the debtor had an open judgment against him for $125,000 from another individual and is currently past due on an $300,000 in loans to another lender.  How would that influence your financing agreement?

Example #4. As part of an operational risk review

Example customer: The Chief Risk Officer, Chief Operating Officer, or Chief Compliance Officer

Due Diligence subject: Company employee base, especially those employees that have access to sensitive materials or financial accounts of the firm or customers

Why: Statistics show that employee fraud is typically perpetrated over a period of time AND often by long tenured employees.  Screening at the time of hire is a best practice, but it's important to ensure that your employees are continuing to uphold those standards.

Example: As part of an annual review, you perform a comprehensive review of every person that has access to your firm's sensitive information and financial accounts.  If, through our due diligence report, you found out that a key employee with access to the firm's accounts, within the last year had been convicted of theft and sentenced to probation and community service, how would that influence your operational controls?

In Summary

While the specific situation varies, the common thread across each of these examples is that Global's Due Diligence report is providing important information to our clients, enabling better decision making.  Information is everything.  Global has the answers.  Contact us before you enter into your next business relationship.