DUE DILIGENCE VS COMPLIANCE

Due diligence is a vital part of tackling anti-bribery & corruption in the workplace. The Corporate Financial Institute has defined it as a process of verification, investigation, or audit of a potential deal or investment opportunity to confirm all relevant facts and financial information. Similarly, compliance means what it does in the word’s consensus: to follow the rules. IONOS further elaborates the phrase’s meaning in a business environment as conforming to the laws, regulations, rules, and policies is the part of business operations often referred to as “corporate compliance.” Due diligence and compliance aid in combating the issue of anti-bribery & corruption in the workplace.

When should these duties be fulfilled?

Due diligence and compliance start before an employee, vendor or supplier is even introduced to the business. They are implemented to reduce risks in professional relationships and satisfy the legalities of running a business; they are also beneficial to the purchaser and the vendor.

Due diligence provides purchasers with all the correct and accurate information to help them make an informative decision to acquire a property, good or service. This is based on the data found about the company. The information ranges from the company’s existing customer base and partner relationships to the areas in which they display irregularities – in the same vein, compliance ensures a set standard for the delivery of the good, service or process.

Vendors find due diligence providing business owners with the financial integrity of their business. It facilitates unearthing the fair market value of their company. A compliance audit on a vendor conducted by the buyers or their agents will validate and strengthen the professional relationship between the two entities.

Key Differences

Compliance is reactive and a legal obligation made mandatory by a government or a regulatory agency. On the other hand, due diligence is proactive and is unmandated, though many organisations like to implement due diligence as a part of their guidelines and procedures. Due diligence is a measure of best practice from industries ranging from Pharmaceutical & Healthcare to Oil, Gas & Energy.

Compliance is tactical, whilst due diligence is strategic. The end goal with compliance is short term but frequent; complete what is necessary for the required period. Alternatively, due diligence screens all information and evaluates it against your company’s objectives. It considers the pros and cons of the decision to help you shift towards a judgment or action.

A checklist drives compliance orientated views and searches for specific items. It checks them off a list, while due diligence creates a full profile searching for previous occurrences, factors leading up to the occasion, and actions taken after the incident.

Case Studies

One of the most infamous examples of this was in 1994 with BMW’s decision to acquire Rover. The decision was made when Rover’s owner, British Aerospace, was facing trying times. BMW had plentiful goals, including engendering trade and diversifying products with the brands’ icons such as the Mini and the Land Rover. However, the ten-day deal lacked due diligence and compliance, leading to a £790 million loss.

BMW overlooked financial data concerns as well as inaccurate sales data. BMW also failed to comply with Rover’s learning culture. They also failed to accept other manufacturing approaches. To top it all off, the frequent disputes between BMW’s directors resulted in poor leadership after the acquisition, followed by mass resignations. Had the company performed their duties to the highest capability, it could have avoided such a costly mistake.

2012 saw HP pay the price of $11.1 billion due to their failure to do accurate data checks concerning income statements, cash flow, balance sheets and footnotes, ultimately halting their plans to move from producing hardware to producing software and resulting in a $5 billion loss.

Our hand in making a difference

Due diligence and compliance are not the same. The consideration of the two components helps finalise a decision, but the difference between them lies within your reasons for investigating and what the end goal is. CRI® highlights the important distinction using Due Diligence DD360°™ and ISO 37301:2021. Why not download our free Due Diligence 360 brochure to find out more?

DUE DILIGENCE 360 BROCHURE

CRI® Group’s compliance and due diligence solutions are tailored with your organisation’s needs in mind. This is to keep you one step ahead of regulatory requirements. Our Due diligence DD360°™ services run specialised intelligence used by global financial institutions and multinational corporations. Complete compliance with anti-money laundering (AML) regulations and legislation is guaranteed. Manage your third-party risks confidently with customised 3PRM™ solutions for your organisation or get certified.

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Who is CRI® Group?

Based in London, CRI® Group works with companies across the Americas, Europe, Africa, Middle East and Asia-Pacific as a one-stop international Risk ManagementEmployee Background ScreeningBusiness Intelligence, Due Diligence, Compliance Solutions and other professional Investigative Research solutions provider.

We have the largest proprietary network of background screening analysts and investigators across the Middle East and Asia. Our global presence ensures that no matter how international your operations are, we have the network needed to provide you with all you need, wherever you happen to be. CRI® Group also holds BS 102000:2013 and BS 7858:2012 Certifications, is an HRO certified provider and partner with Oracle.

In 2016, CRI® Group launched the Anti-Bribery Anti-Corruption (ABAC®) Center of Excellence – an independent certification body established for ISO 37001:2016 Anti-Bribery Management SystemsISO 37301:2021 Compliance Management Systems and ISO 31000:2018 Risk Management, providing training and certification.

ABAC® operates through its global network of certified ethics and compliance professionals, qualified auditors and other certified professionals. Contact ABAC® for more on ISO Certification and training.

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