SERVICES

Don’t trust the data without authenticating it!

Time and again, facts that are material to critical and costly decisions are not discovered until it is too late. Often, that information was readily available for consideration but not brought to light BEFORE investment, engagement or other business decisions were made. This financial loss and reputational damage were avoidable if a systematic methodology had been employed to expose the risks before the damage was done.

 

This is particularly common with, but certainly not limited to:

  • Angel investors seeking opportunities with startup and early-stage businesses.
  • Businesses engaging partners to share the responsibility of completing multi-phase or multi-faceted projects.
  • Governmental entities seeking to procure goods and services for taxpayers.
  • Non-profits unknowingly collaborating with persons or entities whose activities undermine their brand.

PRIVATE SECTOR

Investors looking to capitalize potential opportunities need to operate with the appropriate level of professional skepticism to ensure any of their investments are funding legitimate operations. This is important because the recipient of these investments may or may not represent operations that are fully developed. These is especially the case with startups. These operations may not have moved along a capabilities maturity continuum and may not be as sophisticated of an operation as portrayed or desired. For these reasons, an appropriate level of due diligence needs to be conducted to ensure ownership representations are legitimate and represent a full and valid disclosure of current operating conditions. Many times, material misstatements to investors, potential partners, and acquisition leaders involve providing false or misleading information regarding a startup’s financials, market traction, intellectual property, or team capabilities as a means to secure funding, which can lead to legal liabilities, including securities fraud charges. Common examples of material misstatements include fabricated revenue, overvalued assets, fake partnerships, omitting liabilities, or negative changes to the business. While these misstatements may not be focused on stealing or embezzling, these red flags are consistent with contrived reporting consistent with the “fake it until you make it” culture prevalent in startups and early-stage businesses.

 

  • Accredited Investors
  • Venture Capitalists
  • Partnerships / Collaborative Projects
  • Mergers & Acquisitions

PUBLIC SECTOR

Public sector entities, inclusive of governmental agencies at the federal, state, county, local, tribal, and territorial (SLATT) levels spend an inordinate amount of funds for a myriad of goods and services. Oftentimes, public bidding is held in a legally prescribed manner, but certain levels of due diligence are not conducted if bidders seemingly meet bid specifications. As a result, vendor onboarding can be compromised, as risk identification and risk assessment functions are not performed to sufficient levels, leading to missed red flags that ultimately necessitate embarrassing risk mitigation and ad-hoc monitoring efforts to deal with deficient or compromised vendors. This includes engaging in procurement strategies that may not be in the best interest of all concerned entities and stakeholders, and outside the scope of “stated” requirements and strategic plans.

 

  • Municipal Government Agencies
  • State Government Agencies
  • Authorities & Commissions

NON-PROFIT SECTOR

Non-profit entities can present in a number of ways. Whether an NGO (non-governmental organization) working on sustainability projects across the globe, a local charitable organization raising money for a “good cause,” or an institution of higher education (IHE), these entities are all in the business of accepting funds and financial instruments to further their respective causes. Because there is considerable trust in these types of organizations and their fundraising represents inflows into their coffers, appropriate levels of due diligence may be deferred or avoided for several reasons. Whether donated assets (especially real property) are not properly vetted, seemingly altruistic donors present as “heroes” to the mission, or a situation seems “too good to be true,” non-profit operators that miss red flags can lead these entities into embarrassing times where reputational harm can occur quickly, fiduciary ratings can be adversely impacted, or the integrity of the entity’s fundraising pipeline can be called into question.

 

 

  • 501(c)(3) Organizations
  • Colleges & Universities
  • Foundations

RED FLAG DILIGENCE

Unlike audits, traditionally relied-upon due diligence efforts do not have a uniform methodology structure, and its application of proper vetting varies by operating environment and other contextual attributes. Accordingly, transaction advisory experts present their findings in a myriad of ways. This is why at Red Flag Diligence our clients’ interests take priority over operating environments. The main goal of our due diligence efforts is to provide each of our clients with the best possible support in their transactions and engagements, and by focusing on various red flags we have identified as instrumental to this process, we can identify and highlight risk areas and help our clients make the most informed business decisions in a timely manner.