UC Berkeley enters into many relationships with external partners. Before entering into such relationships—that is, before signing a contract—campus faculty and staff must obtain an appropriate level of confidence that the potential external partner is financially stable, professional,[1] and reputable (or ethical). The method for achieving such confidence is to carry out a set of due diligence steps appropriate to the specific relationship. All potential partnerships should undergo some level of due diligence.
The purpose of this web page is to help campus units understand (1) what due diligence is, (2) the level of due diligence appropriate to a specific opportunity, and (3) the resources available to carry out due diligence.
What is Due Diligence?
Due diligence refers to the research into, and the analysis of, a person, organization, or company in preparation for a business transaction, with the goal of gaining assurance that the other party has the ability to fulfill the conditions and requirements of the agreement. And in the case of potential UC Berkeley partners, due diligence will look not only at the business elements of the relationship, but also at how well the partner’s values align with those of UC Berkeley.
What are the Risks to Berkeley of Entering into Partnerships?
Entering into a relationship with partners exposes UC Berkeley to several types of risk, which can occur separately or in combination. Carrying out due diligence helps to protect the campus from these potential risks (table).
What Amount of Due Diligence is Appropriate?
The appropriate amount of due diligence is generally proportional to the level of risk of the opportunity, where an opportunity is understood as follows:
Opportunity = A partnership between UC Berkeley and a person or entity (the Partner) for the purpose of undertaking a specific Venture
The type of partner and venture are the two elements that enter into the decision about the appropriate level of due diligence, because each of those elements contains some level of inherent risk.[1] Moreover, the two elements in combination define the overall level of risk inherent in the opportunity. This risk relationship is illustrated in the following figure.
Resources for Carrying Out Due Diligence
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FREE SERVICES |
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Internet searches |
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The organization or company’s web page. If publicly traded, see “Investor Relations.” |
If financial reports are available, you can conduct various ration analyses. See: Ratio Analysis: Using Financial Ratios (Investopedia) |
http://www.investopedia.com/university/ratio-analysis/using-ratios.asp |
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Social media (Linkedin, Facebook, Twitter, et al.) |
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CB Insight |
“Venture Capital Database CB Insights helps you track the world's most promising private companies, their investors, their acquirers and the industries they compete in to help you invest smarter.” |
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World-Check |
“Part of the Thomson Reuters Risk Management Solutions suite, the World-Check database of Politically Exposed Persons (PEPs) and heightened risk individuals and organizations is used around the world to help to identify and manage financial, regulatory and reputational risk.” |
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Office of Foreign Assets Control (OFAC), Sanctions Programs and Information Sanctions Lists: |
OFAC of the US Department of the Treasury administers and enforces economic and trade sanctions based on US foreign policy and national security goals against targeted foreign countries and regimes, terrorists, international narcotics traffickers, those engaged in activities related to the proliferation of weapons of mass destruction, and other threats to the national security, foreign policy or economy of the United States. |
http://www.treasury.gov/resource-center/sanctions/Pages/default.aspx |
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Transparency International |
Corruption Perceptions Index |
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SUBSCRIPTION SERVICES |
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Dun & Bradstreet |
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Lexis / Nexis |
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Dow Jones Watchlist |
“Dow Jones Risk & Compliance data solutions are designed to help you mitigate regulatory, commercial and reputational risks. Since 2002 Dow Jones Risk & Compliance has led the market with high quality data solutions aligned to regulations drawing on a global team of highly qualified researchers, access to the Factiva database and cutting edge list management and delivery technology. Dow Jones Risk & Compliance provides destination Online Tools, Data Feeds and Due Diligence reports to suit financial institutions as well as corporations in various industries globally.” |
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Visual Compliance |
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Subscription due diligence services such as KPMG’s Astrus. |
“Astrus, KPMG's secure on-line due diligence portal, provides a robust and cost-efficient way to obtain information and assess risks associated with customers, agents and counterparties. Astrus uses advanced search technology to cover an extensive range of on-line public data sources, including global sanctions and regulatory enforcement lists, corporate records, court filings, and press and media archives. Important integrity and reputational information on subjects is identified and interpreted by dedicated KPMG analysts.” |
[1] The inherent risk refers to the risk that the element would pose if no mitigating factors were in place.
[1] Professionalism refers to being reliable and responsible; to meeting obligations timely and thoroughly.