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Due
Diligence is King
June
18,
2010
When
the architect Mies van der Rohe observed that “God is in the
details,” he could just as easily have been speaking about
due diligence. 
$18,000,000,000.
This is the amount placed by investors with Bernard Madoff. And for
them, this is the amount due diligence would have been worth.
Due
diligence, insurance, and enterprise risk management (ERM) have a great
deal in common. These areas are NOT typically associated with glitz or
excitement. These fields are best practiced by careful people who
tirelessly search for things that can go wrong.
And neither one is fully appreciated until too little was done when it
is already too late.
Because
the good men and women who are charged with due diligence ask the tough
questions, their voices are often shouted down by those who seek easy
answers and false opportunity. And because their careful
analyses sometimes lead them to say “No,” they are
often muscled aside by those who want only to hear
“Yes.”
A
lack of due diligence. Pick
your disaster, and you will see that due diligence was absent from the
room. From the rash of Ponzi schemes to the subprime mortgage meltdown
to the gulf oil spill, we see tragic circumstances that may have been
averted had the man with the pencil and clipboard been allowed to
“kick the tires” and ask tough questions. Instead,
the all-clear signal was sounded even in the midst of significant doubt
as events headed straight over the cliff.
Breeding
a culture of due diligence.
With so much at stake when due diligence is absent from the decision
making process, company managers are called upon to strike a balance
between those who say, “Go, man, go,” and those
others who would say “Slow, man, slow.” Companies
can begin by honoring acts of due diligence efforts that go beyond the
surface. In
addition to rewarding those who take risks, reward those who save the
company’s bacon by astutely assessing risk.
Since humans emulate
heroes, make sure your company’s Wall of
Fame includes men and women who distinguish themselves through acts of
due diligence.
Start
small. The first step on
the road to due diligence can be a simple checklist. Believe it or not,
some of the most effective
Enterprise Risk Management (ERM) Programs begin with simple due
diligence checklists!
Whichever business your company is engaged in, there will be a list of
common sense “Go/No Go” questions. With a simple
checklist, good habits can be formed across all departments. And with
these good habits, a widespread culture of due diligence can be born.
In
keeping with our Casual Fridays theme, none of this information is
copyright protected. Please feel free to share with your colleagues.
 About
KMRD Partners, Inc. –
KMRD Partners, Inc. is a full service
Property & Casualty broker serving
the commercial property and casualty insurance market from offices in
the Philadelphia, PA region. Their mission statement,
“Making a difference by Managing the Cost of Risk”,
is a unique approach that focuses not just on insurance placement, but
coverage expertise, service accountability, client education and risk
management.
2600 Kelly Road,
Suite 300, PO Box 755
Warrington, PA 18976
1-866-957-KMRD (5673) Fax 267-482-8431
www.kmrdpartners.com
Reducing the Cost of Risk
- One Client at a Time
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