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The Morning Risk Report: Compliance is Key to M&A Due Diligence

  • November 2, 2017 | The Wall Street Journal

The earlier the compliance team can get involved in the due diligence process of a company’s potential merger or acquisition, the better the chance any possible red flags or concerns can be identified and addressed before a deal is complete and costs in resources and reputation are more severe, according to risk and compliance experts speaking Wednesday during a webinar on third-party risks hosted by ethics advocacy organization Ethisphere. With global M&A activity continuing to grow, and with similar prospects for 2018, it’s important for companies to have the proper programs and systems in place to be able to make deep dives into potential partners, said Erica Salmon Byrne, executive vice president of Ethisphere.

Michael Ramos, managing director at Nardello & Co., which provides investigative and other services to companies, said in many cases business unit staff don’t call in compliance to conduct due diligence until a deal is almost ready to be finalized, sometimes leaving little time to do a proper, thorough evaluation. “What people on the compliance side need to do is to make sure the folks in legal and the folks in M&A understand the need for compliance to be brought into the process way ahead of the curve,” said Mr. Ramos. “You don’t want to try to do due diligence in Southeast Asia in two weeks. You can overcome that but it involves a lot of resources.” Veena Laakundi, chief compliance officer for manufacturer 3M Co., said early intervention by compliance can also help in the company’s evaluation of the target, and can uncover information that can be useful during negotiations, for example. READ MORE

The Case for Lateral Partner Due Diligence

  • June 20, 2017 | The American Lawyer | By Dan Nardello

A law firm's reputation is built on the conduct of its partners. Firms have traditionally promoted from within, a thoughtful and incremental process. Today, however, it has become much more common to recruit partner-level candidates from competitors. Lateral recruiting can drive growth and enhance a firm's reputation, but it can backfire if not done carefully and with thorough vetting. Given the amount of money spent annually by law firms that hire investigators, it is a curious fact that a negligible percentage is spent conducting due diligence on prospective partners.

The reality is many firms hire senior lawyers on little more than a handshake and a personal recommendation. A 2014-15 study by ALM Intelligence found that few law firms maintain formal policies for vetting partner candidates: more than half do not conduct criminal background checks or credit checks, while nearly two-thirds do not check personal references in a comprehensive manner. Such a lax approach to hiring can be costly, as illustrated by a recent episode involving a former partner at Bradley Arant Boult Cummings. Subscribers of The American Lawyer can access the article here >

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The Morning Risk Report: Asian Companies More Alert to FCPA Risks

  • November 14, 2016
  • | The Wall Street Journal

Asian companies are increasingly alert to the risks of bribery, although they aren’t attuned to the behavior regulators often see as good compliance practice, according to two experts speaking on a panel in Tokyo.

A focus by U.S. prosecutors on punishing individuals for wrongdoing has grabbed the attention of companies in Asia, said Ben Rowse, managing director for Asia at investigations firm Nardello & Co., and Christopher Frey, a lawyer at law firm Paul Weiss. The risk of individuals being prosecuted has caused a “mind shift” among companies, whereas even a penalty as large as $300 million on a company “isn’t going to sink the ship,” said Mr. Rowse, speaking Thursday at a joint event hosted by WSJ Risk & Compliance and Dow Jones Risk & Compliance. Read More