Integrated Due Diligence
When investing in emerging or frontier markets, investors must be prepared for a more complex and changeable operating environment.
Investors are increasingly aware that commercial assessments cannot be accurately made without understanding a whole range of political and reputational factors, particularly in high-risk markets.
In these jurisdictions, being able to fully understand the overlaps between commercial, reputational and operational issues is not only key to mitigating risk, it can be fundamental to gaining a competitive advantage.
In Kroll's experience, market entrants must prioritise the discovery of these links in order to protect themselves against risks such as:
Conflicts of Interest
Bribery and Corruption
Political and Regulatory Instability
As a result, conducting due diligence in the emerging markets requires a new approach.
Traditional due diligence in developed markets is often completed in distinct silos, with a strong focus on risk and less emphasis on transaction intelligence. However, today’s investment environment has quickly rendered this approach insufficient. Investors need to understand the potential impact of the increasingly blurry line between business and government interests.
Due Diligence Considerations in Developed Vs. Emerging Markets:
Kroll’s Solution: Integrated Due Diligence
Recognising where an isolated piece of information could have a wider relevance, and chasing down those connections, is only really possible where the same team or individual is ultimately responsible for delivery of consolidated commercial and reputational intelligence.
By conducting reputational and commercial due diligence enquiries in parallel, Kroll’s Integrated Due Diligence offering is able to identify and analyse these overlaps to provide insightful intelligence.
The investment environment in emerging markets is often characterised by:
Infancy of Data Sources
Scarcity of Information in the Public Domain
Lack of Transparency, Including Complex Corporate Structures and Governance Frameworks
Volatility and Opacity of the Regulatory Environment
Kroll's Integrated Due Diligence method addresses these issues by using information in the public domain as a foundation for its research, and supplementing it with human intelligence. The end result is more detailed transaction intelligence for confident decision making in high-risk situations.
Benefits of Kroll's Integrated Due Diligence approach over traditional methods:
Emphasis on primary research resulting in insightful transaction intelligence.
Discreet interviews conducted with multiple sources to glean the facts.
Ability to verify, contextualise, corroborate or refute information among a wide range of sources.
Accurate, current and direct insight into key reputational, commercial and operational issues.
Ability to analyse and stress test the information gathered against a backdrop of publicly available information and regulatory frameworks.