Intelligence: A risk antidote

James Tamblin describes the vital role of intelligence firms in pre-deal due diligence.

I have heard too many stories from chief executives and private equity partners who wish they had known certain facts about an existing client before entering into a business transaction with them. So why didn’t they do their homework before signing the deal? All I can surmise is that the answer probably sits between not knowing about (or understanding) the capability of intelligence consultancies and bowing to the pressure of a board to get things done quickly. 

In many cases, business leaders are simply not aware of the risks until they fall victim to them. Rarely is the motivating factor driven by cost, as investment in detailed due-diligence, like all other risk mitigating strategies, is well worth the relatively small initial outlay. Effective risk mitigation can save millions in lost revenue and/or additional costs, and protects the organisation’s reputation.  It is a matter of risk appetite and given the lack of such appetite these days, business is booming for private intelligence firms. 

The most successful firms employ seasoned intelligence professionals (former spies, if you will) who recruit and manage targeted sources to provide intelligence 

And from a regulatory perspective, violations of the Foreign and Corrupt Practices Act (FCPA) and the UK Bribery Act have recently encouraged organisations to conduct enhanced due-diligence on business partners, agents, intermediaries and other counterparties. Indeed governments around the world, international organisations and NGOs have been re-enforcing the need for maintaining a robust compliance programme to detect and prevent corrupt behaviour. 

Choosing the right intelligence firm often depends on the type of transaction taking place. The private intelligence sector is not regulated, and the capability of intelligence firms can vary significantly. How do you choose the right firm to trust with your most intimate business concerns? How can you be sure that you won’t be embarrassed in the future? How do you get value for your investment? 

The best intelligence firms do their job by calling on senior sources in the particular market or region of interest. They could be leading academics, government employees, lawyers, business consultants or retired police officers with specialist skills. The credibility of the firm depends on the source being trustworthy and when you are making a multi-million dollar judgement based upon the advice being given to you by your intelligence firm, you want to make sure that you are working with the right people.

The most successful firms employ seasoned intelligence professionals (former spies, if you will) who recruit and manage targeted sources to provide intelligence, whilst maintaining a low profile. Such professionals keep their clients’ interests confidential and ensure that the information is accurate and valuable to the client. Typically those firms that recruit former members of Britain’s SIS or the CIA in the US are amongst the best in the business (though it may be hard to find these guys as they are not natural self-publicists). What makes the best consultants useful is that they have lived and worked in many of the places that are of interest to corporations. If they don’t directly know someone who can offer a discreet opinion on a particular subject, they should have a wide network of knowledgeable contacts that can help.

Successful intelligence firms can deliver valuable intelligence reports without breaking the law or operating outside of their client’s code of conduct. It is widely accepted that firms should adhere to the laws of their own registered country; their client’s headquartered country; and the country in which they are operating. Complex situations may require early legal consultation to draft an operating framework for the firm to operate within. Ethics is a broader issue but can be addressed to varying degrees in the agreed code of conduct. 

Unfortunately, the industry is prey to some unprincipled enterprises looking to cut corners. Here are some examples of activities that are either illegal or have resulted in serious negative PR following public exposure of their activities: 

• Obtaining commercially valuable data that is not freely available in the public domain through interception or hacking. Certainly illegal.

• Ask (or paying) an employee from a key competitor to supply information about their employer. Certainly illegal.

• Dumpster diving. Paying investigators to sift through the discarded paperwork of a target company in order to gain a competitive advantage. Often illegal and certainly bad PR.

It is worth speaking to a reputable intelligence firm to decide what can and should be done in specific situations. In my experience, no two problems or solutions have been the same. 


On another note, it is worth considering internal discretion when using an intelligence firm to deliver due diligence. Indeed, many chief executives prefer to contract the services of a consultant and receive directly the results, so that they alone can make the call on how the information is acted upon. I don’t think that this is particularly surprising given the complex network of loyalties within many corporations.

Often the board is not even aware of such investigative work and perhaps it isn’t really concerned, given that the buck stops with the CEO on key executive decisions. Enhanced due diligence offers comfort that your potential business partner is ‘on the level’ but (as long as it is kept confidential) it can serve as a competitive advantage during business negotiations. If the intelligence on the target is gathered covertly, then it follows that the target is unlikely to know that they have been investigated. Even knowing basic facts about your target may offer an opportunity for you to gain a commercial advantage. 

James Tamblin is director of business development at Viasol, a London-based intelligence consultancy.