Knowing who you are doing business with has never been more important. Borrowers, investors, vendors, customers and employees all represent a degree of risk to your organization. Financial transactions have built-in inherent risks, such as financial, reputational, compliance and possibly legal risks. The potential risks of doing business with someone you don’t know goes well beyond simple economic loss.

Legal liability; reputational damage; law enforcement and regulatory actions; law suits; loss of shareholder value can all result from doing business with the wrong people or organization. 

Fortunately, mitigating these risks can be accomplished through investigative due diligence.  For years, legal practitioners, mergers and acquisition advisors and commercial bankers have been utilizing financial and legal due diligence to mitigate risk.  These categories of due diligence, while extremely important, seldom provide information about a person’s character, integrity, or historical conduct.

Investigative due diligence is the application of investigative techniques developed by law enforcement agencies to mitigate relationship risk by analyzing publicly available information seeking key indicators of a person or entity’s character, integrity and historical conduct. These investigations are designed to gather and analyze a wide array of domestic and international information, to both identify additional crucial information on which to base a critical business decision and to assist in you with the relative likelihood that a given transaction meets your risk tolerance. 

Investigative due diligence assists in mitigating business risks by identifying potential inconsistencies, negative information, misrepresentations, concealing information, hidden liabilities and verifying information asserted by an individual and/or an entity, who you are looking to potentially enter into a financial business transaction deal with. These steps involve looking into the individuals and/or entities reputation, qualifications, credentials, certifications, potential assets and historical record. Investigative due diligence will assist in making an informed decision before you invest money in a business transaction.

There is tendency in our society, in some situations, to be overly trusting of potential business partners, joint ventures, investment opportunities, mergers & acquisitions transactions, strategic alliances, and other financial arrangements. Sometimes deals are made simply by a handshake! Investigative due diligence should be conducted on any potential individual and/or entity prior to executing a business transactional deal with them. 

Some of the facts that could be identified are:

• Current or historical civil and/or criminal litigation.
• Bankruptcies, liens, and/or judgements.
• Prior fraudulent activity.
• Negative media information.
• Prior failed business dealings.
• Regulatory issues and/or other governmental concerns.
• Undisclosed relationships, affiliates, investors, etc.
• Disbarments and/or regulatory sanctions levied on the entity.
• Other misrepresentation such as licensing, degrees, etc.
• Conflicts of interest.

The costs of addressing these risks are small when compared with the huge losses that can result from entering into a toxic business transaction or relationship. Fiscally responsible organizations should implement proactive measures to manage and mitigate their risks, such as implementing comprehensive investigative due diligence protocols when considering executing any significant business transactional deal. Failing to exercise due care by conducting appropriate investigative due diligence research and analyses can have a devastating impact on you and your organization. 
 
How We Can Help
Adam Shay CPA, PLLC (“ASCPA”) professionals have a reputation for independence and professionalism combined with expertise that makes us highly qualified to provide forensic and investigative account services. ASCPA includes highly capable individuals with diverse and highly relevant experience, including certified public accountants, certified fraud examiners, forensic accountants, and former law enforcement personnel.
 
ASCPA’s professionals have assisted organizations develop robust fraud risk strategies and ethic programs for corporations, privately owned business, government agencies and not-for profits in various industries.
 
Drawing on this broad range of skill, ASCPA can provide a tailor-made plan to address the specific issues facing your organization. Equally important, we can help you effect change in your organization by providing recommendations and guidance to assist you in managing your risks and address the integrity of your organizations’ internal programs and processes.

Adam Shay, CPA (NC License Number 35961), MBA, is managing partner of Adam Shay CPA, PLLC. Over the last several years, the firm has grown from a one-man shop to one of the largest firms in the Wilmington area. Adam focuses on minimizing taxes and improving the financial results of entrepreneurs. Those results are obtained by taking a proactive approach to all aspects of taxes and financials. Adam is actively involved in supporting the Wilmington entrepreneurial and startup community. He earned a Bachelor of Business Science in commerce from the University of Virginia and a Master of Business Administration (MBA) degree from the University of Maryland. During his spare time, Adam enjoys spending time with his two boys and wife, Sarah, as well as coaching and watching sports and spending time outdoors.