How well do you know your Partners and 3rd Parties?


Reading through the Mike Volkov and Tom Fox blogs certainly provides food-for-thought around FCPA violations and infringements. Mike is holding a webinar next week to talk about FCPA with respect to Private Equity and Hedge Funds, in particular when such companies are considering international mergers or acquisitions; Tom talks about whether FCPA scrutiny revolves around the oil and gas company because of the places where they operate or the ‘cowboy tradition’ of the industry.

These articles got me thinking about the partners and 3rd parties that such companies contract with to conduct business in countries like Russia, China and Mexico. My question for companies with significant international operations is simply “How well do you really know your Partners and 3rd Parties?” I posed a similar question in my blog last month, but the point is worth repeating.

Most companies it seems, who are expanding their international businesses or looking at potential M&A activity, do a pretty good job at the front end – ie the due diligence stage. Vetting partners, 3rd party relationships, etc. The problem is that business relationships are not static – they change and evolve. Personnel changes, from sales to research and development teams to supply chain partners. With these changes, so does ‘who we do business with’ and more importantly ‘how business is conducted’.

At Catelas we are not advocating that companies need to monitor every business relationship every minute of the day, but we certainly recommend regular check-ups (or assessments). For example, a company might be have expanded its business operations into South America. Well it would not hurt to conduct a business partner / 3rd party assessment after 1 year to examine what those business relationships look like. Or a major pharma company conducting clinical trials in Indonesia may find it makes sound business sense to identify the key relationships that exist between the company, partners, 3rd parties and hospitals, six month into those trials.

As this picture shows, these 360 degree assessment need not be a massive, expensive investigation in-country. Nor is it a major audit of the company’s financials and partnership contracts. Rather they are designed to be a non-obtrusive examination of how¬† business is really being done on a day-to-day basis – ‘who is talking to who’, and ‘what are the key business relationships in place’. It provides first and foremost ‘peace of mind’ that the company is conducting business ethically. But if red flags are raised as a result of the assessment, then it provides a process for undertaking a more detailed examination.

And hence the MRI analogy we have used before – the Catelas 360 degree assessment provides an MRI into your foreign business operations – answering the question “How well do you know your 3rd parties?”. To learn more take a look here or give us a call. I would love to hear your views.

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