Two companies can operate in the same sector and country but need very different integrity reviews. Start with how each business makes money, who it depends on and which decisions could undermine the investment. A sector label helps frame the enquiry; it cannot answer those questions for you.
In the Fund Shack conversation on integrity risk in private equity, Rupert uses a hypothetical comparison: an offshore wind business and a residential or industrial solar provider. Both belong to the energy transition. That does not make their operating models interchangeable.
The useful comparison is between the pressures and dependencies inside each business, rather than the length of their policy folders.
Describe the business before scoring it
For each company, write a short account of what it does, how it does it, who it works with and where. Then add what the investment is intended to change.
In the podcast’s example, the offshore wind proposition involves concessions, substantial capital commitments and offshore installation. The solar proposition involves buying equipment and arranging installation through others. Those are starting points for different enquiries, not findings about any particular company.
Ask management to explain the decisions that make delivery possible. Who secures access? Who selects suppliers? Who signs off work? Who can change a price, approve an exception or commit the business to a promise?
If the account stays at the level of market opportunity and revenue growth, ask for a recent example of how work was won and delivered.
Compare dependencies, rather than counting third parties
A long supplier list is less useful than knowing which relationships the business cannot afford to lose.
For the offshore wind example, start by asking about concessions, public decision-makers, major contractors and the arrangements for selling electricity. For the solar provider, ask about equipment sourcing, installers, customer commitments and responsibility when installation or performance falls short.
These are questions to test, not assumptions that one model is inherently safer.
For each dependency, establish:
- what the counterparty can decide or withhold
- how much discretion the company’s own people have
- who can challenge a decision or payment
- what evidence management receives about delivery
- what happens if the relationship fails
That makes the comparison practical. It also gives the deal team a reason to spend more time on some relationships than others.
Test controls against those decisions
Both companies might have procurement rules, an anti-bribery policy and a complaints process. Ask how those arrangements work at the points identified above.
For a major project commitment, you might ask who can change the specification or approve extra cost, and how that decision is reviewed. Where installation is outsourced, you might ask how the company checks completed work and handles disputes about responsibility.
The same policy title can cover very different tasks. Request an example of a control being used, including an exception and what happened next. This is more revealing than asking management to confirm that a document exists.
The third-party and distributor risk guide takes that part of the enquiry further. Here, the purpose is to decide where the two businesses require different attention.
Ask what the growth plan will strain
Compare the companies as they are expected to operate after investment, as well as today.
Will one take on larger projects? Will the other add installers, territories or customer commitments? Which decisions will move away from the founder? Where will managers need to delegate without losing visibility?
Ask what happens when delivery pressure conflicts with a control. Can someone delay a commitment or challenge a commercial promise? Who hears about a problem before it has been tidied up for the board pack?
These questions connect culture to the operating model. A general assurance that the team has strong values does not explain how a difficult decision gets made.
Put the differences into the investment decision
Finish with a short comparison of the critical dependencies, the decisions requiring scrutiny, the evidence still missing and the changes needed before or after investment.
Avoid collapsing that work into a single score before explaining the differences. A score without its reasoning gives the investment committee little to challenge.
The practical test is whether the comparison changes the next enquiry or the investment conditions. If both businesses receive the same questions and action plan despite different operating models, revisit the assumptions behind the review.