Risk for Thee But Not for Me


Putting adverse findings into perspective.

Bankruptcy, litigation, and negative press—each of these subjects trigger alarm bells when they appear in a due diligence report. Accordingly, it is important for readers to consider several points when reviewing potentially adverse findings.

A helpful starting point for evaluating red flags is to remind oneself of the personal or company goal behind the investigation. Is a potential business partner being evaluated, an executive being considered for promotion, or an acquisition being planned? In each of these situations, a holistic approach to potentially adverse findings serves to calibrate concerns inline with a client’s specific focus.

A widespread area of concern for diligence clients is litigation. When reviewing legal matters, note the subject’s role. An individual identified as a plaintiff is often viewed differently in terms of potential risk than a subject who was a defendant. Next, check the case type. Is it a personal injury matter stemming from a minor car accident or an accusation of securities fraud? Relatedly, it is helpful to note a subject’s profession when considering their involvement in litigation. Notably, it is not uncommon for board members of publicly traded companies to appear in extensive civil litigation such as shareholder suits stemming from opposition to an entity’s sale or a disagreement over stock prices. In such an instance, note if there are specific allegations against the subject or if their inclusion as a party is based solely on their board role.

Financial troubles including bankruptcy and liens typically raise a reader’s eyebrows, especially in relation to a potential business partner. A property lien originating from a divorce and a judgement lien stemming from a criminal matter will likely have differing impacts on the evaluation of a subject’s suitability for a senior leadership role. Likewise, if a subject has been involved in a company bankruptcy, consider the larger picture. Was this individual directly involved as an owner or through holding a senior fiscal position or was their affiliation indirect such as having served as the chief marketing officer or head of human resources?

Negative press coverage can instantly impact the reputation of an individual or organization. Whether an investigation has revealed a single article or decades of media scrutiny, the source of adverse coverage should be noted. Does all of the coverage stem from a single publication? What is the nature of the publication? Is it an established news agency or a tweet from a recently created account with only a handful of followers? Does the originator of the information have a specific orientation such as an advocacy group or partisan publication?

An experienced due diligence provider such as Vcheck Global leverages a combination of extensive industry experience and innovative research tools to tailor findings to a client’s specific needs. Whether you are considering engaging a diligence firm for the first time or are seeking to enhance your company’s competitive intelligence capabilities, partnering with Vcheck Global’s seasoned team will help achieve your diligence goals.

Seth Harlan is Senior Associate, Market & Regulatory Affairs at Vcheck Intelligence. 

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