Top Five Tips for Protecting Investors Effectively
The role of investors is crucial in the growth of many companies. They are the ones who invest capital in your company to supply the funds needed to finance your ideas, plans, and products. This enables new companies to establish themselves and existing ones to expand and prosper. However, they are taking on a significant risk; if your company succeeds, they will earn an impressive return on their investment. If it doesn’t succeed, they could lose their entire capital. Due diligence background checks play a vital role in protecting investors by ensuring the credibility of businesses and mitigating potential risks.
There are many instances of investors who invest in businesses that have a huge loss, and they lose large amounts of cash. There are instances where people may have lost their entire investment. A few famous examples include:
Enron scandal The chief executive officer, founder as well and Chairman were indicted for corporate abuse as well as accounting fraud. Others against executive executives include the laundering of money as well as securities fraud mail fraud, wire fraud, conspiracy, and insider trading. The shareholders of Enron lost around $74 billion over the time before its bankruptcy. Employers lost billions from their pension accounts.
Stanford Financial Group of Companies – The investors suffered approximately $7 billion US dollars as part of the Ponzi scheme of Allan Stanford who has been sentenced to a term that is 110 years a federal prison. A large portion of the victims was retired people who were offered “safe investments”, and the losses weren’t all recouped.
Customers from Bernie Madoff – Stanford ranks second, but it is not as good as Bernard Madoff. Madoff has been implicated in numerous frauds that ruined the money of a large number of investors. As of November 8, the prosecutors believed the fraud was for $64.8 billion.
Theranos Elizabeth Holmes CEO – COO Sunny Balwani committed a huge time-consuming fraud as per the SEC. Senior executives of Theranos said that their company’s unique blood testing system was a success. Theranos secured $700 million of investment from renowned investors. However, the product didn’t work as planned, and the company was kept under wraps, and access to the principal lab was secured to stop anyone from disclosing the true situation. In addition, they claimed to earn $100 million annually in revenue, which is an enormous misrepresentation of the firm’s financial condition.
There are many important points. There are many other instances of poor management of funds, fraud, or complete theft, both large and small – are located. In the wake of the dot-com crash and the subsequent financial crisis, investors discovered from experience that the technology companies they put their money into weren’t real, but just empty tables where there was no task was ever being completed. The harm caused by these scams was quite tangible and caused an impact on all legitimate enterprises when their investors walked away from companies that had high potential, in fear that they would be stung by more scams.
Anyone who commits success is concerned about safeguarding their company. They realize that protecting their investors, who desire an equitable profit on their investment and want to have it in the long run. What steps be taken to ensure the safety of you and your clients? Let’s look.
The increase and visibility of illegal behavior in companies is the reason for losses, scandals, and damage to reputation. A thorough “deep dive” due diligence might have been prevented, had it not for the losses and incidents.
“It takes twenty years to establish a name and just five minutes to destroy it. If you consider that you’ll make decisions differently.” -Warren Buffett. Warren Buffett
1. Choose Your Executive Hires and Business Partners Wisely
Some people choose their meal food items and coffee with more care than business associates or associates. From the world of entertainment and the political arena, many of the most significant business scandals are a flurry of allegations and accusations of misdeeds, from sexual assault to criminal acts. The revelations are the fact that although individuals involved in a case of malfeasance could have had a background in particular disciplines, they were individuals with a less-than-stellar moral character.
Unwise hiring decisions, as well as business partners, cause various damages, which include lost productivity, liability for legal fees, damage to reputation as well as scandal. It can also result in an effect in the form of revenue loss if clients and clients decide to take their business to another company. There is also an even more subtle type of capital loss – the loss of money due to the bad attitudes and behavior of employees. This can be caused due to internal issues low morale and poor work ethical standards. When you work in larger organizations it may not be as apparent as smaller ones however it’s still crucial. The most important thing to remember about the investment process is to protect your investments. This is one thing you must take care of in all cases as ethically making a decent profit and for the company, you, and your employees should be a top priority.
What do you want from your employees and partners? Do you place integrity and character on your top priorities? Are you working with employees who are committed? Are you a team player? Honest? Focused? Solution-oriented? Positive? If not, it is time to find out details about the individuals whom you trust with your money.
How do you make the right choice in the selection of the hiring of business partners and executive hires? Make a list of the top priorities you want to achieve and then ensure that the hiring process is integral to your partnerships and hiring regardless of current fashion in the hiring process. Be sure to know whom you choose to hire, by working with an investigative agency that performs the due diligence of executives regarding executive hiring as well as business partners instead of regular background checks so that you can protect the investors from having to regret their investments. Be aware that investors could and might pull their cash out when your business is shattered through corruption fraud or sexual abuse, the loss of productivity and morale malfeasance or misconduct, or if your reputation is damaged. A thorough due diligence process and smart selections are essential.
“When cost is number one in importance, you’ve already lost.” -Jim Rembach, Six Sigma Consultant Jim Rembach, Six Sigma Consultant
2. Create a Culture of Integrity
The company culture has been celebrated over the past decade or so and has become increasingly significant as Environmental, Social, and Governance (ESG) investments and social responsibility have been the focus of attention over the past few years. It is not surprising that different businesses have different cultural styles. A company, for instance, that makes surfboards has distinct cultural nuances from one focused on accounting. It doesn’t matter if your item is eco-friendly, high-tech clothing, or conventional banking, the primary part of any corporate ethics is honesty.
What makes the integrity of a person crucial? In any working environment, the principal objective is to establish an effective company that is honest, ethical, and committed to getting things done. Additionally, more customers are choosing to invest their money and trade with organizations that have a commitment to integrity as their primary quality, and who are committed to an excellent work culture. Integrity could also refer to becoming more ambitious in the company’s mission and vision, for example, dedication to social values like environmental sustainability. Before this, values like these were typically viewed by companies to be “nice to have, but not essential to bottom line profits”. It is now changing rapidly since more employees are sharing private workplace experiences via social media, and employees are more aware of workplace culture and values.
What does integrity mean to you? “Integrity is defined as the quality of being honest and having unshakable moral principles, situated at the intersection of consistent actions and strong values,” According to the Learn Loft. To create the foundation for a moral culture, it is important to have employees that are team-oriented and who are doing what is right every time regardless of whether anyone is watching – or even when things are difficult.
Your leadership team should lead by example and with integrity. An organization that is united by establishing leadership based upon clear values, excellent character. And guiding principles helps embed integrity in the fabric of the environment. The company’s culture shouldn’t tend to expect or tolerate anything less. The company is responsible to its investors to establish an environment built on trust equality, fair, and employed policies that don’t favor a particular group or individual over the other. A corporate culture that promotes the right to make fair decisions and doesn’t permit external or internal influences to influence decision-making is extremely beneficial for employees, executives as well as investors.
A way to minimize the chance of bringing on an individual who might not align with your values of honesty is to conduct due diligence tests on all new executives hired. Also, running regular due diligence checks on the leaders. You hire will ensure that major life events or changes aren’t affecting your company or the investors you invest in. Due diligence is a safeguard for both you and your shareholders.
“It’s more beneficial to be with those who are better than you. Choose associates with a behavior that has a higher standard than yours and then you’ll move to the same way.” -Warren Buffett. Warren Buffett
3. Protect Your Business and Your Investors by Choosing Due Diligence Investigations to Mitigate Risks
Due diligence in deep dives is quite different from regular background checks. The standard background checks are typically performed when new executives join the ranks. Background checks that are routinely conducted could miss a lot of the underlying problems. That more thorough due diligence investigations can uncover.
Background checks typically reveal the bare minimum of data (less than one percent of the serious problems). And executive due diligence examines over 30 elements of public record details, and thorough reviews of media and news outlets. As well as an extensive, dark internet and historical search on the internet, producing 20% serious concerns. Due diligence which is a deep dive will reveal crucial information that cannot be found in a standard background check.
Information reviewed in deep due diligence checks includes:
- State, federal, and local criminal records,
- Con artists working under false names,
- anti-competitive behavior,
- Legal and financial issues
- Civil litigation concerns,
- Undisclosed connections with other corporations as well as board advisory positions that could be a source of conflict,
- falsely portrayed education, and exaggerated work background,
- Reputation issues,
- History of behavior (for instance, litigation history or the history of harassment sexual),
- unresolved and hidden issues.
Imposters, criminals as well as con artists are prevalent all over the world and can be difficult. If not impossible to identify with just simple background screening.
It is also important to keep in mind that situations are likely to change as time passes and, in turn so do their decisions. Due diligence needs to be performed regularly, rather than only when the new employee’s tenure. The frequency at which due diligence must be performed can be determined based on the specifics of your company’s circumstance. Its risk tolerance, and the recommendations and assistance of an expert investigation firm that has international experience. And a thorough understanding of the requirements of regulatory compliance.
“Whoever is careless with the truth in small matters cannot be trusted with important matters. ” — Albert Einstein
4. Choose an external investigative firm With Due Diligence Experience
There aren’t all firms that are equipped with the same level of knowledge, experience, or capability to carry out thorough due diligence investigations. To protect your business and your investors, it’s essential to work with an outside firm that can perform both individual and corporate due diligence tests that are deep dives. The company you choose to work with must have resources across the globe. In addition to years of experience in the field of investigation. Work with an investigative agency that not only conducts thorough due diligence investigations. But also efficiently, but also one that can perform thorough due diligence exceptionally well. Only mitigate the dangers that have been discovered.
“The secret of success is to do the common thing uncommonly well.” -John D. Rockefeller Jr. HTML3 John D. Rockefeller Jr.
5. Be Willing to Invest and Commit to Vetting Business Partners
As your customers are willing to take risks in your company A well-run business will invest in time and resources to protect the investment, as well as safeguard its own business as well as its image as well as its growth. This is particularly important when it comes to larger ventures such as Joint Venture Partnerships, and international businesses. As well as in M&A transactions. Up to 35% of suppliers from abroad suffer from corruption-related issues. The basic due diligence process may just reveal only 5% of these grave issues.
International supply chain fraud has been documented extensively, as numerous firms have incurred significant penalties. Each year, penalties imposed for Foreign Corrupt Policies Act (FCPA) violations are increasing. For 2020, officials from the Department of Justice (DOJ) as well as the Securities and Exchange Commission (SEC) handed down an incredible $6.4 billion in financial penalties due to breaches against 12 firms.
Because deep dive due diligence is a specialized field and commitment. This kind of work requires a thorough review of all public records information and is augmented by detailed field information as well as. Deep web searches to identify known or, even more important, undiscovered or unreported circumstances.
Make sure you protect investors from taking a risk on you at an early stage. Make sure you are prepared. If you put your money into the most robust due diligence process as well as a risk management maintenance program. This is a guaranteed option that can yield substantial returns.
Also Read: Maximize Your Attic: Cleaning and Insulation Guide
