Is your company taking due diligence seriously?

When 75% of our background checks identify flags, a simple Google search isn’t enough.

In 2002, Yahoo discovered that CEO Scott Thompson could not have obtained a bachelor’s degree in computer science from Stonehill College, as the course was not offered until four years after he graduated. In 2018, the world’s largest luggage maker, Samsonite, also announced its CEO had stepped down following allegations he lied on his resumé.

These are just two high-profile examples, whereby both companies, as market leaders in their sectors, overlooked the details of their most senior executives’ CVs. This resulted in not only financial losses but, most importantly, it had an embarrassing impact on the company’s public image. Skeletons can be found in even the safest closets.

How much due diligence is enough?

Having the right background information allows organisations to work with confidence, compliance and assurance.

Our Due Diligence Team completed over 600 background checks during 2018. As part of our analysis into these checks, we implemented a simple traffic light system, giving each background check a status of Red, Amber or Green. Red showed a significant red flag had been found; Amber confirmed that discrepancies were identified; whilst Green meant there were no issues identified on their CV or application form. From our research, a total of 75% cases were identified as an Amber (69%) or Red flag (6%). This means during the open source phase, a further investigative phase is required, or the scope might also need to be expanded into additional jurisdictions.

During this research we identified a number of near misses, where clients had been poised to appoint a professional who, at first glance, seemed like the ideal candidate but turned out to be less than desirable. Our findings included allegations of insider trading, sexual harassment, fraud, drug taking, undeclared insolvencies, court litigation, ties to sanctioned individuals and companies; all of which clearly demonstrate the need for background checks before employment to help safeguard your organisation’s reputation.

No more Google searches.

Whether it’s through an in-depth interview with a former colleague which reveals criminal activity or undeclared financial issues identified through official records, relying on a Google search to identify these kinds of risks is unwise – none of the red flags we identified during the 600+ background checks in 2018 were found through a Google search.

Detailed examination of databases, online resources, and interviews with carefully chosen individuals and sources, is the only way companies can be certain to minimise risks when engaging with a new senior hire, partner or business. Interestingly, there are several mechanisms in place online for people to hide their backgrounds: for example, companies which bury negative online profiles for a fee, as well as the Right to be Forgotten law codified in the EU’s General Data Protection Regulation (GDPR). It further proves that using standard search engines will not recover scrubbed data, however, an experienced due diligence analyst is trained to spot the signs and collect factual information.

Due diligence is a very complex and challenging undertaking. A thorough background check into senior executives and new hires should entail rigorous interrogation and analysis of information gathered from a range of open sources, such as: subscribed databases; press articles; company registries; court searches; public records and documents; reference checks; employment and education verifications, as well as social media platforms. It is critical to identify all the possible risks, as the additional cost for the supplementary phases is minimal compared to the possible losses incurred from a bad business decision.

For more information regarding our due diligence service, please email us via info@tenintel.com. Our team is looking forward to providing assurance and help your organisation make informed decisions.