Due Diligence Definition:
Investment due diligence refer to a process of extensive and intensive research to evaluate an investment decision, considering all possibilities and verifying the information used. In this article, when I talk about risk, I refer exclusively to the risk of fraud or manipulation in the accounts of the companies in which we invest directly or through funds occurs.
Most people when inverted (as in many other things) tend to think that “someone” protects and cares for us if things go wrong. For everything, there is a body and / or any law (supposed) protects the investor, only when something happens that adversely affects our investments, we found that we did not have such protection and the supposed security was not what we thought.
The truth is that we can meet unforeseen situations where protection is supposed to have does not exist, or at least not as we thought it was; What if when we withdraw money from an investment fund and the manager simply refuses to repay? Of course, that will never happen, but it was not the same a few years ago as they don’t know what real estate fund? What happened with the money of shareholders? things that seemed very obvious in the end are not as clear and as the risk does not materialize, we feel peace and security, even when the risk becomes sinister, we see that we were and are no more protection than we tried ourselves, through information that we have obtained before and during the duration of the investment.
Laws are not to protect the investor. The investor is taking money out of your pocket and not another; yeah that is! that looks increasingly less in this world of investment; managers, consultants, managers and other people related to investment to which we often refer to them as investors, are just brokers, an investor is only risking his money.
For example: If you hire a fund you must sign a document and thus these saying you know in which the fund invests and know the risk you assume, but who protects the document?, when firms do you really know when assets, where, when, invest a fund? signing the document, these freeing the bank of responsibility, which, moreover, is actually a responsibility that can only assume part of the bank itself or broker, because they do not know what risk you assume therefore the risk may come from future movements made by the fund manager and those movements will never be known before they occur, nor you can authorize. the risk of investing in a fund, adds or decreases the manager, when you buy or sells , neither the bank nor the investor can control although it is the investor and him alone, who assumed; if someone lost, pocket investor who is going to notice because it is the investor who always bears the risk, but never controls.
Here we will check out investment due diligence checklist or the process one should take into consideration:
1. Assessment of Environmental and Social Risks and Opportunities:
A social and environmental review is an essential element of all IFC investments. The participation of specialists of IFC (International Finance Corporation) environmental and social issues in the early stages contributes to a greater understanding of customer needs and the risks and opportunities in those areas associated with the proposed investments. The Corporation can help companies gain the competitive advantage by reducing and managing environmental and social risk and identify opportunities to improve the business value advantages.
2. Insurance Services:
Insurance specialists that are part of each team IFC (International Finance Corporation) investment provide customer support in evaluating exposures and specific business project risks and guidance on the structuring of appropriate and effective methods cost to mitigate, treat or transfer risks (including solutions in insurance). Participation in the early stages of the project cycle ensures that sponsors receive prompt and constructive information, plus tips on identifying and mitigating risks.
3. Mechanisms against Corruption and Fraud:
IFC (International Finance Corporation) is at the forefront of the market and development institutions in the protection against fraud and corruption in its projects. This approach complements and supports its determination to act as a leader in sustainability. Avoiding fraud and corruption is necessary to ensure the success of investments, effective use of resources and the fulfillment of their development goals.
4. Working with Offshore Financial Centers:
Evasion of taxes is not accepted at any stage of a transaction that involves the World Bank Group. Tax systems and strengthen efforts against corruption in developing countries is one of the main objectives of the Group’s strategy to control tax evasion and misuse of public resources. In addition, the Bank Group exercise due diligence ensures that the structures for investment are chosen for legitimate reasons and not used to evade taxes, violate tax laws or other illegitimate purposes.
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