Appropriate Due Diligence
Could this be the “Miss Manners” edition on due diligence? No – never! But it is about what is appropriate given the circumstances and time.
We cannot get all of the information in the form that we want in the time that we have. Many times our time budget and resources are very constrained and we have to adapt. When this occurs we must address the general accepted ‘big risks’ then ask everyone – what questions have I failed to ask, what do I need to ask of these people, of this company of this project so I can make an inquiry into what I don’t know. Look for what is absent; look for what lurks into the dark, what is unspoken. These risks may be large or small, who knows, but this is where the surprises always seem to arise.
Also some places in his world are not well computerized. You may wish to equip yourself with the appropriate software to scan and dump numbers into spreadsheets or records into sortable databases.
In several adventures into central African countries I saw how limited some of these communities can be. In many places there are no addresses, and no state ID’s and many were illiterate. So how do you open a bank account? The banks had worked out ingenious schemes of locating people in reference to a nearest village. They changed their banking systems client intake to take photos of all of the account holders as they opened up accounts so there was no ID required and no signature comparisons – just a photo. It was ingenious and worked. They used what was appropriate to the location. Mind you, the first world consultants were having palpitations trying to fit the banks KYC due diligence into their western check sheets, but that is their fault – their checks sheets were inappropriate to the tasks at hand. They were crafted in another place and many of the questions asked assumed so much other work had already been done and so many others record’s existed – when in fact they just did not exist in the place.
I also applaud the funniest SAR I have ever read. In that dry African humor – it started like this…
The client is a paint dealer who claims to sell 1.2 million USD a month of paint for cash. His purchase of supplies does not support this claim of volume and if you have seen this town – it could use many coats of new paint and this town is certainly is not getting the paint it needs.
The due diligence standards and work has to be appropriate to time, talent, treasury as well as the circumstance of the country, culture and conditions. T3 must align with C3 or one is set up for frustrations and failed a due diligence process that will fail needlessly.