Due diligence is a procedure carried out by UM Global HR to provide its clients with opportunities to review resources and potential liabilities in detail. This procedure is a crucial step prior to making firm commitment to move on with a project or a potential investment.
Why do we conduct due diligence?
We conduct due diligence to provide our clients with material facts that shape the outcome of any initiatives. We assess the levels of risks in business decisions that typically involve strategic business alliances, mergers and acquisitions, or when outsourcing of key business processes are being considered. We ensure our clients are comfortable that all material information presented by potential business allies accurately reflect the resources, benefits and liabilities of the initiatives.
A wide range of risks exists particularly when mergers and acquisition or an outsourcing decision is involved. These risks include: political risk associated with the countries in which the target company for acquisition is based; retraining costs or potential interruption of core business processes; or loss of key employees or institutional knowledge. Other risks are embedded within differing labor regulations, business rules, finance and banking regulations.
Our due diligence services include investigation of the accuracy of past financial accounts, review of current and outstanding liabilities, environmental scan to determine the probability of key employees, suppliers and customers remaining. Review of labor related liabilities, such as pending labor related legal actions, employment contracts, acquired rights, availability of post employment benefits, retirement programs and existing corporate governance procedures.
In scenarios where outsourcing of key business processes is the solution, the information we compile and deliver to our clients include: (1) whether jobs will be taken outside of the United States in support of the cost-cutting initiatives– “If so, which country?”; (2) whether regulations pertaining to protection of private data are applicable to the country where jobs are to be taken; (3) whether technology exist to ensure seamless transition and continuation of services; (4) whether knowledge transfer and data migration are possible through heavy use of secured technology; (5) we conduct physical plant check or data center check, we look at the service providers' facilities; and (6) statistical analysis emphasizing probability and consequences.
In the space of outsourcing, we also review the potential service providers' ability to stay in business for the duration of the contract and beyond. In this sense, we review the service providers' financial data - from revenue to liabilities to internal governance policies.
Additionally, we conduct probability and consquences analysis on business activities that are important to our clients. This includes "first call resolution", the employees' ability to communicate in the language necessary to address customers' needs, "drop call rates", absenteeism rates, employee attitudes, and rising labor, training, and attrition costs at outsourced facilities.
Due Care
After we document risks and their levels or severity we work with our clients to develop practical measures and strategies to prevent, control, abate, and mitigate the risks. In the process of providing due care, UM Global HR puts the highest priority on the importance of a "collaborative approach". A collaborative approach is important in defining reasonable expectations and acceptability of measures and strategies put in place to mitigate risks. Moreover, stakeholder participation helps in determining the significance of estimated risks in absolute and comparative terms.
Financial analysis in terms of costs to repair or mitigate risks is part of our due care delivery. We compare the level of risks established in the due diligence part, with established criteria or best practices. We provide project valuation, cost/benefit analysis, as well as break-even point analysis as part of our efforts to shed light on the economic impact an outsourcing or a M & A initiative would generate. Funding options for response and recovery are also discussed with our clients with a view to deciding whether the risks of outsourcing is acceptable, or whether transferring or diversifying the risks is more viable for the situation.
In summary, Due Dilligence and Due Care (D3C) go hand in hand. UM Global’s due diligence identifies risks associated with actions, and our due care activities identify back up solutions and associated costs needed to mitigate the risks. This is the heart of UM Global HR's D3C model.
