Overview of Due Diligence
What is Due Diligence? Due Diligence is the investigation done before purchasing another company. In simple terms, Due Diligence means taking care of things to avoid harm to other persons or their property. Due Diligence is a tedious & expensive task. It is said that you need to know as much about the person or business as you do about your own business.
Why Due Diligence Matters? Due Diligence helps Investors understand the nature of the deal and the risks involved. Doing Due Diligence is like doing homework before an acquirement of the potential deal. It is very essential for an informed investment decision. Businesses that undergo Due Diligence offer a higher chance of success. Due Diligence helps in making an informed decision by giving the right info to decision-makers. “No matter how much you spend, when it comes to Security and Frauds it is never enough”
One ATM incident is changing the whole ATMs Business Points to Note:
- Safety and security is beyond all financial metrics and fees
- Indian businesses are expanding geographically
- ATM, Branches, Retail outlets are growing at a rapid pace
- Internal resources are not adequate to manage such rapid growth
- Travel costs to reach the Tier 2, Tier 3 locations does not justify the audits/inspection regularly
- Increased use of outsourced services (Eg: ATM guards) across all industry a bigtime bomb
Inspection/Due Diligence of Branches/Retail Outlets
What Happens Today: Branch & Retail Outlets are audited by Internal Auditors & Compliance Staff. GAP: Not all branches/outlets are covered. It is not a third party/Independent review.
What Happens Today: Most of the audits/reviews/inspections focus on financial risk and process adherence.
GAP: Physical risk is almost always ignored
What Happens Today: Reviews and audit results are usually reviewed in isolation and to see if there are non-compliances.
GAP: Results are not benchmarked and compared to industry standards/Risk indicators
What Happens Today: People posted at Branches / Retail outlets/factories etc are handled as all other employees
GAP: People's Risk is ignored. People at branches/retail outlets are customer facing and subject companies to fraud, reputation risk, safety concerns, etc.
Your Outlets/Branches are Funnels for PROFIT and RISK
Physical Security: The objective of this risk factor is Physical Safety and Security of the location. Some of the Concern areas of this factor is Physical Vulnerability, Lighting System, Fire Safety, Alarm System, etc. In this factor, checks are done of Security Guards, Safety equipment, and Interviews are done on Awareness.
Reputation Risk: The objection of this factor is the Impact of Branch/Outlet on Reputation. The concerns here are Mystery Shopping, Behaviour Checks, Ambience, and Adequacy of Services. Example Checks of this factor include Mystery Transaction and Perception feedback.
Compliance Risk: The objection of the factor is to check compliance with industry standards / internal policies and Procedures. The biggest concern for this factor is Money Laundering. To overcome this concern Interviews on Key Company Policy requirements and Checks on AML/KYC are done.
Frauds and Financial Risks: The main objective of this factor is Pilferage, Robbery and Organised Fraud. Concern areas of these factors are ATM/Vaults and Visitor Identification Procedure. You have to do Interviews and Surprise Checks on Assets to keep an eye on this concern.
Benefits of Assigning Riskpro India
Riskpro India is one of the leading Risk Consulting firms that specialize in risk management. We are a multi-location organization with member firms/partners across India. All industries that rely on outlets/branches can benefit. Example: Banking, Insurance, NBFC, Retail, Distribution. The following are the benefits:
- No need to spend travel costs /consume man-days of audit/compliance staff to visit a branch
- The review is conducted by risk specialist in a timely manner as per agreed schedule
- All results/feedback are analyzed by Senior Riskpro staff for relevance and concerns
- Review checklists are constantly updated to address emerging risks &unusual industry events
- Independent unbiased results, opinions, and recommendations
Why is Due Diligence necessary?
How Riskpro can help?
Riskpro can assist you with any of the above services. For more details, please email info@riskpro.in