When the Chinese equivalent to Starbucks lost in the region of 90 percent of its valuation in April of 2020 due to it being investigated by regulators for discrepancies in its accounting numbers, many people said that they ‘should have seen this coming.’
Corporate intelligence professionals argue that the company should have been approached by a corporate intelligence investigations attorney and consulted with when the investigators, who were led by the state, made it clear that they were intent on looking into the company’s finances. Prior to this announcement by the Chinese government, there were clear signs out there (some people had picked up on these) that this was going to happen sometime soon. For instance, the alarm bells should have begun ringing when there was a major difference in the ways that Chinese and Western media outlets provided coverage on the company. Then there was the poor history of their principals and the trick used to try and explain away the large profit margins – apparently, the company was able to do something special that none of its competitors ever could.
Corporate Intelligence Firms
These types of firms work to protect and/or reassure multinational corporations that are looking at new ventures by providing them with in-depth risk analysis and research that is completely independent. Where a company ups its roots and sets up in a different country, an intelligence firm can provide them with the confidence required to move boldly and quickly in order to ensure a smooth integration. The type of research produced by these firms includes everything from a basic insight into customer compliance, to in-depth due diligence of products. Other services that they provide include top-end consulting on a strategic level and investigation support in the instance of some sort of company crisis.
In order to conduct their research, corporate intelligence firms use publicly available data. This is then used to form the basis of who companies that are new to a country should and should not do business with when looking for new manufacturers or third-party suppliers. Although preliminary, these are very important checks that need to be made in order to identify fraudsters, as well as those that represent a high risk for whatever reason.
In countries where publicly available data is difficult to get hold of, such as in China, corporate intelligence firms differentiate themselves by stating how much of this data, as well as none public data like insight reports, that they are able to access. A high-level firm should have the capacity to provide insights on any company’s operations, leadership, and strategy, as well as identifying any concerns relating to political exposure, fraud, and/or corruption – this type of information is not visible in public data.
This information is combined with the work of the firm’s investigators who go out and retrieve data from far out brick and mortar publicly available registries, perform covert site inspections, and engage with previous employees and customers. All of the information that is retrieved during this process is collated by analysts, rather than by a computer based algorithm, in order to produce some valuable content. The best firms are able to do this at great speed whilst still providing lots of depth and insight, even when looking at a very niche industry.
The best way of getting a feel for a firm is by looking at who is doing the work for them. The bigger ones tend to use young graduates that are paid less than older more experienced professionals. This is why the smaller more boutique firms are sometimes the better option as the people doing their work are of much better quality and come with plenty of experience.
Purpose Of Intelligence
For when commercial ventures do not quite go to plan when setting up shop in a new country, corporate intelligence firms are able to provide management of the crisis, as well as other more investigative services. They are able to address issues such as the protection of supply chains, the counterfeiting of goods, and the theft of their intellectual property. As a result, some firms become one-stop shops for critical advice on best practice techniques for registering copyrights, patents, and trademarks with the correct bodies. In addition to this, they also act as conduits for cooperating with government authorities when raids are conducted on warehouses and factories that may be illegal.
Legal counsel and compliance departments both heavily lean on corporate intelligence firms when claims of corruption or bribery are made. For instance, the United States Department of Justice and the Securities and Exchange Commission have brought about several cases already regarding breaches of the Foreign Corrupt Practices Act (FCPA) by multi-national corporations.
Capable, respected, and experienced corporate intelligence firms have the best lawyers working for them and so they are able to successfully dig for evidence and fully unpick events when conducting internal investigations. However, in such instances, it is not uncommon for those carrying out the investigation to become highly involved in the story themselves. One famous case where this happened was back in 2013 with the company GlaxoSmithKline (GSK). The company hired the corporate intelligence firm ChinaWhys to look into claims of anonymous bribery. In the end, GSK was fined somewhere in the region of $550 million, but so was the lead investigator (Peter Humphrey) for acquiring personal information illegally.
In some certain countries, such as China, choosing a corporate intelligence firm that has a good reputation is highly important. This is so that all information gathering techniques that are used can be closely managed to ensure that they follow exactly the letter of the law. Although the results produced by these firms are not always perfect and the conclusions that they reach are not always black and white – however, there are few better ways of managing a company’s risk when moving to a different country and for being prepared for making bold decisions than by bringing an independent investigator on board.
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