Due diligence in its current form is a bit like commissioning a report before buying or leasing a second-hand machine. It makes sense if you’re purchasing or renting something massive. No one wants to be lumbered with a stolen jet plane or a server farm laced with malware. But, what about these situations:
- There’s little reliable (or even available) public information
- The $ amount isn’t much
- You’re buying in a market where some wear and tear is expected (second-hand vehicles or partners in markets with lower standards of governance) What should you do when you receive a DD report with big gaps, caveats, and vague references to possible issues? Maybe a simple triage system might help.
For the remainder of issues, and especially in longer-standing relationships - investments, partnerships, key suppliers - due diligence 2.0 might be necessary. DD 2.0 is including your key third-parties in training and upskilling you’re already doing internally. We’re seeing impact investors, healthcare organisations, and increasingly those in infrastructure extending training, knowledge sharing and resources to third-parties. The folks pioneering these approaches seem to find it a more scaleable solution (the more “compliance kit” content they develop, the quicker and easier it becomes to upskill third-parties). If you’re not already “commodifying” your risk & compliance content (policies, training, guides, checklists, tracking tools, etc.), try it (or get an intern!). I did, and it’s revolutionised the speed and efficiency of implementation support. DD 2.0, is, in essence, an expert (you) looking under the hood and a chance to fix those wear and tear issues that could prove very hazardous down the road.
Airports, Emojis, Yoghurt, and CEOs
Nope, not the latest scandal involving a Fortune 500 exec; these were the early test cases of emotion recognition (and lie detection) using 6-channel analysis (face, body, psychophysiology, tone, verbal style, and verbal content). When I started studies in this area back in 2012:
- Airport security (and broader counter-terrorism agencies) wanted to spot angry people. The thesis didn’t work; upwards of 70% of people in airports are angry. Having recently flown EasyJet, I am reminded why.
- Pixar wanted to ensure the little emojis captured the emotions well enough for us to recognise them without explanation.
- Market research firms (in the UK especially) were tired of product taste tests where people were too polite to say the yoghurt (or whatever else) was disgusting. Catching microexpressions of disgust might save millions in product development and marketing.
- Hedge funds like to know when CEOs (or other execs) are lying (withholding the truth counts) during quarterly (and other) briefings.
The lesson (for me at least) was that a skill developed with one aim (improving my investigative game) could be (re)purposed. What (seemingly unrelated) skills compliment what you do?
Quotes to remember
“For every complex problem there is an answer that is clear, simple, and wrong.” HL Mencken