Know your partner in business

Wednesday, October 21, 2009 | Posted by: Grant Thornton
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Background check on potential partner enables you to make the right decisions for mitigating transactional and operational risks.

Today, business is global and the emerging markets, where the return on investment is highest and the country risk can be mitigated, are very attractive.  However, these emerging markets are not subject to the same level of regulation and transparency that one may be used to in a developed economy. This may lead to ‘mistaking the forest for wood’ and making commitments that may subsequently prove harmful to your business and reputation.

No matter how thorough a legal and financial due diligence may be, there are always grey areas, as this exercise is based on information disclosed by your partner, there is always a doubt at the back of your mind, have they told you every thing or is this what your partner wants you to know?

So are your options limited to basing your decisions on what you have heard from acquaintances, found in your financial and legal due diligence and trusting your partner? 

You have the option of doing a discrete integrity and reputation check, so that your business decisions are based on facts rather than your partner’s assertions, by identifying and flagging the potential pitfalls.

By getting the information from a wide range of sources, networks and databases, a discrete background check (integrity and reputation check) on your potential partner in emerging markets supplements your financial and legal due diligence as it addresses:

• Completeness of disclosures
• Commercials have not been misrepresented
• The partners are ethical and honest in their dealings
• What is the management culture
• They are respected by the
• Market
• Competition
• Employees
• Suppliers
• Clients
• They do not have a history of litigation and/or out of court settlements
• They are not regularly in trouble with the regulators or statutory bodies
• They do not have criminal antecedents
• They are not very closely identified with a political party or ideology

These are issues that cannot be clarified without impacting the atmosphere of trust that is essential for an ongoing business relationship, but they are essential, as these issues impact your business not only financially but also your reputation and brand, which could be far more damaging than the financial loss.  You need to have the comfort of knowing who you are dealing with.

Anil Roy
Partner,  Specialist Advisory Services
For Grant Thornton India

Colin Johnson
Director, Forensic and Investigation Services
South Asia Group
For Grant Thornton UK LLP