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WHY CHARACTER INVESTIGATIONS AND REPUTATIONAL DUE DILIGENCE ARE IMPORTANT (ESPECIALLY FOR STARTUPS)

Unreliable and non-reputable partners or employees can create significant financial, reputational, and legal problems for a company. While it is true for businesses of all sizes, it is especially relevant for the new companies and startups who, on most occasions, only have one shot to make the right call and can’t afford to make costly mistakes like their bigger and more established counterparts.

Bad employees can generate losses to a business through deliberate acts like theft, embezzlement, and fraud, or unintentional acts of negligence or inappropriate behavior that can lead to liabilities and increase the risks of lawsuits and other damages.

For this reason, it is important to filter out and pick the right people for the company by conducting character investigations, in addition to standard background checks which usually consist of only confirming the information present on the job application form (such as education and work experience) and do not include an analysis of applicants’ previous actions (other than criminal record checks).

While confirming the information on an application form or a resume is an important element of a vetting process, on its own, it does not reveal any information about motivations, interests, character traits, and other factors that can influence future behavior and decisions of an individual. There is a good reason why highly sensitive employment positions include a character investigation in the screening process: because past behavior is the best indication of future actions.

A character investigation examines a persons’ interests, comments, actions, and other available information from open sources and interviews with past associates, and friends, or family; in order to get a better understanding of how the individual interacts and behaves in both professional and personal settings.

Is the person punctual? Do they keep up with their commitments and obligations? Do they associate with groups or participate in activities of questionable nature? Do they have extremist views or beliefs? Do they like to make inappropriate, racist, or sexist comments? Those are only a few of many questions that a standard background check will not cover; and those are the same questions, which if left unanswered, will expose a company to many potential risks and undesired consequences.

The same process can be applied to a business entity. Corruption, negative media exposure, political exposure, sanctions, human rights violations, money laundering, terrorism financing, excessive lawsuits, unreliable supply chains, and bad overall reputation due to customer dissatisfaction are the most common risks that a new business partner can expose a company to.

Verifying a potential partner’s past behavior and associations can give a good overview of how they operate, what kind of people run the company, what kind of partners they deal with, do they follow rules and regulations of the industry, and do they have timely service and payments schedule records.

A Reputational Due Diligence can answer those (and many other questions) and can help a company decide if they want to associate themselves with a specific entity and what kind of risks a particular partnership may bring.

A character investigation on a person or a reputational Due Diligence on a company can be tailored to suit all types of client requirements and budgets. From simple general overviews covering only recent and local events to in-depth multi-year, international reviews and analysis; there are several approaches and methods that can be used in order to obtain the right information for a business owner or a director to make the right decision for their business.

It is important to be aware that what is considered to be an unacceptable risk in one industry, could be viewed as a normal occurrence in another. For this, reason having knowledge of specific requirements and understanding of particular circumstances surrounding a company and the industry in which they operate is crucial in order to properly assess risks and evaluate concerns that were identified during an investigation.

At Maldem Investigations we have several years of experience in conducting character investigators and reputational Due Diligence for a wide range of sectors and industries. We have the required expertise to successfully assist our clients gather information efficiently and cost-effectively, which allows them to mitigate risks and get on the right track to success by selecting the right people and partners for their business.

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