Imagine hiring a new manager only to discover later that they have been involved in a serious offense, have significant conflicts of interest, or have a history of causing problems for their previous employers. Once the contract is signed, it’s challenging to reverse the decision without incurring costs to your business. This scenario underscores the importance of conducting Due Diligence Background Checks to avoid such costly mistakes.
Moderna’s board of directors figured that out in the most painful way in May 2022, when they recruited Jorge Gomez to serve as their chief finance officer. Although they conducted some thorough research on his past, they didn’t examine much more than the basics. Following the announcement that they made public, Gomez joined their group, Moderna made a shocking finding: the company he worked for was being investigated over financial misconduct. Gomez was only employed for a day as the CFO of Moderna before being let go of his employment in exchange for $700,000. The cost and the effort involved during the process of hiring, as well as a blow to their image.
This is only one instance of how you should conduct more than the basic due diligence before deciding to hire executives. An in-depth look into Gomez’s background would have revealed the scope of his investigation as well as his involvement before his being appointed, which would have allowed Moderna to stay clear of the embarrassment of hiring a CFO who has no record of his own.
What Exactly is Due Diligence?
Some people think that due diligence is exactly similar to a background check However, it’s far more precise than a background check. Background checks happen at the time of hiring any employee regardless of their position at the workplace. The background checks provide a brief picture of the criminal and financial history in the form of a report that will reveal whether someone was convicted of a crime or declared bankruptcy. But, they will not tell the details beyond this.
Due diligence can be performed only when hiring executive and C-suite executives as well as when buying or merging with an existing firm. Due diligence’s goal is to highlight the risks that may lead to a loss in the company’s reputation, revenue, or even clients. This is more than felonies as well as sometimes, bankruptcy. Do your due diligence and examine items like an arrest record in different countries, cyber-related activities and conflicts of interest civil suits, financial infractions as well as others.
To put this into perspective Let’s review how the basic due diligence and deeper dive due diligence are distinct, the ways that a deeper dive into the past of a candidate can safeguard a business as well, and how Infortal Worldwide is here to aid you in this deep dive.
In What Circumstances Do You Require Deep Dive Due Diligence?
Basic due diligence can be more than just a background check It doesn’t examine the background of someone. It’s enough to provide some light on if a prospective employee is guilty of committing felonies or embezzlement, or has been extremely litigious. It only searches thirty databases that contain details. This isn’t going to reveal every single thing. You may find a few basic issues with hiring a person However, it generally just highlights a tiny fraction of possible issues.
Moving up to the next degree of due diligence including the use of open-source tools for intelligence to collect and review all publically accessible information, may not be sufficient. Although this can pull information from the media Social media, court filings, trading data, and so on, however, it’s not going to give you 5 percent of the data that you need to hire executives. Although it’s more accurate, it’s still not enough.
It’s also the reason why the due diligence of deep diving becomes a factor. This is the level that delves into the entire open source intelligence and the international watch lists, dark web activities, and links to businesses of other companies as well as other businesses. The course will examine the aliases of others that may result in conflicts of interest.
If you are not asking inquiries like “Did the person have a job at the company? Do they reside in the region during this particular duration?” that background checks can do, thorough due diligence casts a vast net. It analyzes the connections a candidate has and the way they might make use of these connections, instead of just checking data. This is vital for hiring an executive from a company. Since it’s extensive this type of search may take between 30 and 60 hours, however, it’ll reveal more information than other types that are due diligence.
Key Ways Deep Dive Due Diligence Protects Your Company
Due diligence that is deep dive will aid your board of directors hiring committee members, as well as others with information that could not be found without the use of. When using open sources of intelligence or watch lists and various other databases will turn an array of data regarding a possible hire there are several key methods that deep due diligence, particularly in the dive area will help make a well-informed hiring choice.
Learn candidate aliases and other names
Certain candidates have utilized other names previously. Although some of the names are likely to be found on search engines, there’s the possibility that one or two of them will not. This is particularly true when candidates take care to conceal their aliases or use distinct names from other States or nations.
Deep dives also look through people with popular names to gather details about the people they represent. Anyone with a popular name such as Joe Smith may not be easy to find online since there are many individuals with the same name. In a deeper dive, additional factors like address, birth date, employment information, and more to decide if details pertain to a prospective person or concerned with someone else who has a similar name.
Take the Complete International Picture
A few companies just look up the information contained in state, local as well as national U.S. Databases. However, while this may show if an individual has been convicted or tried within the United States, it will provide no information about other international civil or criminal instances. The executives, particularly those who worked for big multinational companies before are likely to engage in business operations elsewhere.
Finding out if they were suspected or convicted of the commission of fraud or been identified in a malpractice suit in a different country could reveal that the candidate isn’t the right match. Due diligence can also show if the person is an owner or investor of any company located in a different country. These could uncover possible conflicts of interest which would not be brought to light.
There’s always the possibility that someone has left the country they were born in so that they don’t get arrested or accused of criminal acts. It may sound like something in a Hollywood film However, it’s a reality. If the individual quits for legitimate reasons, businesses should be aware of the criminal background of their former employers and operations before moving into the U.S.
A Simple Search Might not Reveal all Conflicts of Interest
An interest conflict can result in the possibility of misconduct. Executives with connections to a different company might try to negotiate with that firm better rates or transfer partnerships or contracts towards the company. Although these relationships aren’t necessarily detrimental to either company they can lead to the executive taking the same amount from both parties. This is a major conflict of interest that shouldn’t never happen.
Unfortunately, basic due diligence might not reveal this, particularly when the person in charge is going out of the method to hide or conceal their connections to another organization. There are several methods to accomplish this and it’s not a conflict of interest regardless of the method the company employs.
In-depth due diligence can expose these relationships. The company’s leaders are informed of which other companies the applicant has connections with, allowing them to steer clear of partnerships or partnerships. However, even if the company is located in an industry with which it would not be in contact with, the fact that the candidate wasn’t forthcoming about this information is a positive sign. This is a red flag and could mean that they’ve not been sincere about other matters also.
Simple Due Diligence does not search in the Dark Web
The dark web has information that very only a few users ever come across. The information is crucial in making hiring decisions. If the applicant has some sort of profile on the internet’s dark side, it’s nearly all the time a red flag. Although they may have done nothing illegal, there could exist information on them online that could be used to intimidate or otherwise coerce them. The company could be affected in particular if a candidate may be blackmailed to obtain money or other favors. Businesses may want to alert the candidates to be aware of the fact that their private data is available through the dark web even if they decide not to go through the process of securing a new employee.
What is the Reason it is Important to Perform a thorough Due Diligence?
Like the Moderna illustration, the executive level or C-level positions, as well as other positions with a lot of attention are prone to destroying a company’s image at the very least and cause severe financial loss at the worst. The hiring of a CEO with an enviable history of scandal can cause a loss of respect and confidence in the business if their background is made publicly known. hiring a CFO who was part of a criminal probe in another nation or a CTO who has had a hand in numerous SEC infractions can be humiliating as it could lead to business partners and investors breaking ties with the business.
If luck is on your side it’s just a matter of having to take out one year or more of wages and then take an occasional dip in your stock value. Moderna is fortunate because it bounced in a fairly quick manner when it came to revenue. The embarrassment however has severely damaged their image, and it could remain with them for the rest of their lives. It is not the norm for companies to suffer such little damage resulting from a poor choice in hiring. Some companies go for years before finding out the CEO, CFO, or any other top leader has a shady history or has been involved in illegal activities. Some executives may even make use of the company’s assets to fill their pockets, placing all the company’s assets in danger.
Infortal Offers Infortal with Deep Dive due Diligence to Minimize the Risks
Most companies can perform simple due diligence and routinely check at the very least criminal records of the candidates they choose to hire. Yet, not many companies know how to conduct a thorough investigation into the candidate’s background. They don’t have the resources or experience to discover these details. Some simply don’t find the time.
Infortal offers the expertise along with the equipment and experience to conduct these thorough depth dives. If you’re looking to hire someone to run your business, you’ll need to know the full story of whom you’re going to invite into the company. For more information on how we can assist you, call Infortal immediately.