Due diligence checks vital for investors
Changing economic fortunes, over the past five years, have also seen struggling companies in Kenya look for partners in a bid to raise new capital, create synergies and build economies of scale to tackle increasing competition.
However questions are now being raised on whether most companies take time to carry out due diligence or background checks before putting their money into a particular investment.
“A careful look at the history and background of a scheme, a company, an individual or business could reveal red flags such as litigation in certain countries, lack of a track record, peculiar ownership structures, questionable tax standing with various authorities among other key legitimacy measuring sticks,” he says.
In business terms due diligence is defined as the care and attention that would reasonably be expected of a prudent investor before making any investment.
Research by Protection Masters, which also specialises in business intelligence, corporate and individual investigations, shows that only a few Kenyan companies or businesses hire experts in the field to conduct research on potential business partners or when hiring employees.
Loopholes in carrying out due diligence have also created room for counterfeit products in the market.
In 2016 Kenya was ranked among the largest markets for counterfeit goods in East Africa, and serves as the distribution point to the region.
“Networks of cross-border smugglers target fast-moving and highly profitable goods to import into Kenya illegally, including food, electronics, and cosmetics.
Kenya Bureau Of Standards said Kenya loses Sh69 billion every year due to fake goods entering the market and experts term this as lack of background checks by companies.