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On this page I'll publish some of my comments in professional discussions related to due diligence, background screening and investigations in Russia. Why would I do that? - Just because sometimes it is simpler to find the right answer on the blog then search it on the local computer.
I have no intention to lay my hands on other people intellectual property and will try to publish as many references to the asker as possible. Sometimes it is more important to ask a good question than to find the correct answer.
I hope no one will blame me for publishing his name. I’ll mandatory delete undesirable reference by the first wish of the owner.
QUESTION
Do you trust the accuracy of background checks conducted by 3rd party vendors? How reliable are they?
Sam Zabanna
Marketing Professional
ANSWER
In my opinion this question is complex and must be considered from all sides.
1. Can we rely on pre-employment background check results in general? – No, because it gives us only additional data which must be used as a part or appendix to applicant assessment made by the recruiter or HR professional. Pre-employment background check results are helpful, but they can’t make the decision for you.
2. Can we rely on references? – Partially, because even authorized employee of the company can give us unreliable data about the applicant if they had negative/positive personal relations. There are means of references validation, but these means are comparatively expensive and the employer rare agrees to pay for their implementing. Moreover, references depend on local culture of the applicant and his former employer. It is almost impossible to get negative response from the Japanese former employer unless you applicant was claimed as a fraudster, in Russia most references will be negative; in the States it is probable that you will have some data about applicant “sex relations at work” as extremely negative reference, but in Russia you’ll heard that “the guy is very successful, women love them” and the reference will be positive etc.
3. Can we rely on the pre-employment screening result of the 3-rd party vendor? – It depends on validity and legitimacy of resources this vendor uses in his work. It is extremely important if you are involved in international cooperation and need to “screen” foreign employees to understand HOW exactly your vendor will operate during the BG screening process, what kind of resources he will use, etc.
QUESTION
Do you use a graphics program to chart some of your cases? If so, what applications do you use them for and what programs do you recommend?
James Cronin, MPA, CFE
Owner, Seattle Insurance and Legal Investigations
ANSWER
We use i2 Analyst for big projects, but regular cases can be managed and presented to the client in simpler programs like Mind Manager or Ms Visio. For time lines and project management I use Ms Project 2010.
I love Mind Manager because it can export the chart and comments to Ms Word in a second. Half an hour and you will have your report ready. Several times it saved my projects when I was asked to make urgent progress report.
Ms Visio helps me to analyze and present corporate structures, business-processes and basic time lines. In a few Due Diligence projects I was forced to use BP Win to estimate operational expenses and risks of future merged enterprise.
For sure social network analysis is a big challenge for simple programs (in my opinion i2 is comparatively weak for this job) and must be managed in special analytical environment like Pajek or similar programs. I can hardly imagine private project where deep SNA will be required.
QUESTION
Do you think Fraud and Coruption by government employees is on the rise?
Michael G Kessler
President at Kessler International
ANSWER
In my area (Russia & CIS) corruption is traditionally high.
During recession (since the mid of 2009) bribes level increased +7-10%.
On the other side, while business is in trouble, there are fewer opportunities for governmental employees to ask for bribes, so in general their income is the same as it was before the recession.
QUESTION
Do you turn away prospective clients or do you do work for anyone that comes in the door with CASH?
Michael G Kessler
President at Kessler International
ANSWER
With no doubt the market is different in the US and Russia, but while working with prospective client we use the following technology which is proved to be effective in our area:
WOULD YOU LOWER YOUR PRICE DRAMATICALLY BECAUSE THE PROSPECTIVE CLIENT SAID THEY CAN GET THE SAME WORK CHEAPER?
- In most cases the client can’t compare the quality of the work before the work is done.
E.g. if the client asks us to quote reputational due diligence project and my estimated budget is 25 000 USD while my competitor is stated that he can do this work for as low as 10 000 USD I prepare step by step description of the project and we discuss the need and importance of every step with the client. Often the competitor can’t prepare detailed description of his work and the only think I can do in this case is advice my client to accept/mitigate the risk of poor quality. Sometimes the client is ready to exclude several steps to make my work cheaper and then (if it is not against my ethics) we can cut the price.
Sometimes when our competitor is “private security specialist” his work is certainly cheaper and I have to inform the client that the price includes our reputational risks: if the competitor will fail to make his work done he will lose only one client, but if we will fail – we can lose our reputation and even market share. It is a strong argument during negotiations.
- If the client is limited in budget it is our responsibility to find the cheapest reasonable project.
If the client would like to check e.g. creditability of the subject, but he can spend only limited budget, we try to offer cheapest methods of data-mining and data analysis.
HOW DO YOU HANDLE THE CHEAP CLIENT - WOULD YOU DO LESS THAN QUALITY WORK?
As I mentioned before, if the budget is limited we can’t use some data-mining methods or informational sources. We fix these limits before the project and I see no reason to treat results of such project as “poor quality”. I think “limited to data-mining and analysis methodology” is a good substitute.
THE INDUSTRY IS MORE COMPETITIVE THAN EVER-HOW DO YOU STAND OUT FROM THE CROWD?
In crisis while some companies decided to cut their expenses and targeted on partially-legal activity we made the decision to go in the opposite direction: we hire new employees with strong experience and high rates, try to win a market share which is free because of the crisis (as I’ve said many companies decided to cut their expenses and now the quality of their services is below clients’ expectations). It is obvious that the crowd will compete underbidding the market and I see no reason why we should play this game.
QUESTION
Can we quantify reputational risk? Where does it belong?
David Benyon
Staff Writer, Operational Risk & Regulation, Risk.net
ANSWER
I think it is simpler to talk about brand value risk, because the methodology of its measuring is more standardized and comparatively well-known. I don’t expect banks to be interested in adding reputational risk to their ICAAP.
I doubt that my opinion will be supported by the rest of the Group, but measuring risks of non-value assets is nothing more than client’s money spending. I prefer to talk about brand value because:
1. The brand can be sold separately and has a market price that can be measured by independent market experts; reputation can’t be sold: it can be built or lost only.
2. Talking about business point of view, brand is a nearest concept to reputation, because both concepts add value to the product and increase sales volume.
If I’d be asked to measure reputational risk I’ll direct my team on measuring of added value of the product and/or service structure, client’s ABC structure and dependencies. It is possible that some indicators can be developed after the appropriate research but they will also 95% correspond to brand value risks measuring.
QUESTION
CI conducted in developing countries
Over the last few years there's been increased interest in conducting competitive intelligence in developing countries, both from the "outside" (global companies selling in that marketplace) and from the "inside" (national companies expanding both locally and internationally).
How has this development affected the way your company approaches CI? What are the potential long-term effects on CI processes and procedures which have been primarily developed in 'western' countries?
Bonnie Hohhof
Director Competitive Intelligence Research
ANSWER
Talking about Russia and CIS, there are many trends in CI these days.
1. Western practice adaptation and development – hi-tech companies, banks and insurers are trying to implement regular procedures of CI in their business practice. Operating In recession they face two alternatives: a) reinvent technologies of CI, cut expenses and implement “kid size” projects, b) hire western consultants and hope that business will go on better. In fact both alternatives lead to poor results. There still lacks of local professional CIs on the market, western experts are not familiar with Russian business practice.
2. CI based on security department – it is a “great” invention of Russian mid-sized businesses. Almost every company has so called “security department” – problem solving structure often headed by former police or FSB officer. It is very successful when company needs support when it is attacked by raiders or governmental authorities but not effective when the CEO needs actual business data or forecasting.
QUESTION
Do you use letters of recommendation?
Joel LeBlanc
Experienced ARM Consultant and Debt Buyer
ANSWER
In Russia (security & investigations industry) written references are very important during the process of preliminary negotiations with the potential client. Moreover it is a must to present references if you fight for governmental contract or plans to work with top-10 Russian companies.
The effectiveness and ability to get these references depends on type of services.
Guardian services, CCTV (small projects): it is easy to have a reference letter from the client even if there were problems during cooperation. Effectiveness of these letters is comparatively poor but we still ask for written feedback and use it as an appendix to governmental competitions’ documentation.
Big projects with technical equipment installation (CCTV, Intruder alarm of a factory etc.): Effectiveness of these reference letters is very good – potential client usually examines this document, gives a direct call to the company which recommends us to find our details of cooperation.
Collectors agency: we rare ask for written feedback because the potential client will make his decision if he’ll trust our expertise in his exact case and it doesn’t matter how much money we saved to our previous customers. Only if the potential client trusts our ability to solve his problem the project will go on.
Detective, Due Diligence & Background screening services: if we work with the “end-user” of the assignment he can give us written feedback. We use these letters of recommendations as a strong argument during negotiations with the potential client. On the contrary if the project was fulfilled through partnership (mainly international contracts) it is almost impossible to get feedback. “Dmitry, we know you are good and it was nice to work with you. We will mandatory continue our cooperation in future, but we prefer not to promote our partners and keep your contact details as our competitive advantage” :-) It is usual feedback from either strong international corporation or local market leader. I dream to have written references from my partners because 2-3 times I lost contact with my foreign contractor when his top-manager resigned from his job and simply forget to give new employee my contact details.
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uncovering the truth about background screening procedures in Russia
