Doing your Due Diligence
The value and benefits of due diligence is immense. It can help you avoid costly mistakes and save you time. So, what is due diligence? This article explores the concept of due diligence, why it’s important and highlights why every company should undertake due diligence checks.
Due diligence describes a process of conducting background checks on a person(s) and/or companies to establish any ‘red flags’ about their historical conduct.
Due diligence checks are conducted when significant decisions are made, such as prior to awarding contracts following a procurement process or when significant personnel decisions are made within a company. From OCM’s observation over the years we have seen an increase in due diligence checks as companies are appreciating the value they add and understand that there is a cost associated with making the wrong decision.
A recent investigation by the NSW Independent Commission Against Corruption (ICAC) has highlighted how important it is to undertake due diligence checks.
The ICAC investigation involved allegations against Steven Prestage, an Information and Communication Technologies (ICT) contractor working on an ICT project at the NSW Dept of Finance, Services and Innovation (DFSI).
The Commission found that Mr Prestage recommended to DFSI to engage Petite Software Systems to undertake information and communication and technologies (ICT) work on a project.
Petite Software Systems belonged to Mr Prestage’s friend, Michael Turner, who was its sole director and shareholder. However, Petite Software Systems never performed any work for DFSI, and Michael Turner was unaware that Mr Prestage had “hijacked” the name and was using it to obtain a financial benefit from the department. Mr Prestage orchestrated the appointment of Petite Software Systems as a supplier to DFSI, by falsely representing to the department that ICT government-accredited suppliers could not fulfil DFSI’s requirements.
The report notes that Mr Prestage facilitated over $500,000 worth of corrupt payments in a five-month period, both the quantum of the corrupt payments and that they were made in such a short period calling into question DFSI’s control framework.
Mr Prestage’s conduct was facilitated by numerous control failings, that included risks inherent in engaging him in the first place as he had a history of engaging in misconduct.
The above example shows how due diligence and doing your homework should always play a large role in any organisation. Had the appropriate checks been conducted on both Mr Prestage and Petite Software then this costly situation could have been avoided.
OCM offers a cost effective and thorough service to help your organisation with conducting due diligence checks. The benefits of conducting due diligence will assist you in the long run.
Contact John Renshaw on 0417 699 395 to discuss how OCM can assist your Organisation.