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Conduct Your Own Due Diligence

The companies registered with the Business Network have been pre-screened by the 2010 Commerce Centre to confirm information and to protect members. While our screening process is fairly rigorous, it is important that members conduct their own due diligence in investigating potential partner companies. This should be done before making initial contact, arranging partnered bids, signing contracts and beyond.

Using a due diligence investigation to confirm the credibility of information can help to ensure that members minimize their risk of financial loss resulting from a partnership. The level of detail in which the due diligence investigation is conducted should depend on the desired relationship to be formed, its complexity and the nature of the companies involved. It is important to note the significance of due diligence while also being aware of the potential pitfalls of overdoing the process, which can stifle a favourable partnership agreement. It is recommended that professional help be sought during any of the following scenarios if members are unsure of the accuracy and rigor of their own due diligence process.

Scenario 1: Before Initial Contact

Before making initial contact with a potential partner, members should conduct an initial search of the partner company in the public domain to confirm all information provided. Use multiple sources and take note of any negative publicity or testimonials. Members should discover what the interests of the potential partner are. Once this brief initial investigation has been completed, potential partners will be able to initiate contact with each other in a more informed manner. It is important to keep an open mind during this stage as the initial investigation is chiefly exploratory in nature.

Scenario 2: Consideration of a Joint Bid on 2010 Opportunities

During this stage, members will want to engage in an extensive evaluation of the potential partner(s). Members should seek answers to questions such as:

• Is there a conflict of interests?
• What is the company's public image?
• What kind of team spirit does this company have?
• Are our organizations compatible?
• Does this company's products and services complement our own?
• Does this company have the capabilities required?
• How much experience does this company have? Have they successfully engaged in partnership agreements in the past?
• Is this partner reliable?
• What are their strengths and weaknesses?

This is by no means an exhaustive list and the rigor of the due diligence investigation will vary depending on the nature of the proposed agreement. These questions are meant to provide a general framework for the sort of answers members should seek prior to entering into an agreement which will invariably involve some degree of financial risk as well as risk to a company's public image. Conducting this investigation will help prospective partners gain a better understanding of each other and thus a better understanding of the possible risks.

Scenario 3: Beyond the Partnership

Upon the completion of a successful partnership contract on a 2010 opportunity, partners may decide that it would be advantageous to continue the relationship beyond the Games and into the future. At this point it is highly recommended that extensive due diligence investigations by professionals be conducted prior to entering these relationships to facilitate informed strategic decisions. Below are some of the common checks that these professionals can provide:

Background Checking Agency

• Reference Checks
• Background Checks
• Criminal Record Checks

Lawyer

• Lawsuits past and pending

Accountant

• Assessment of management
• Credit ratings
• Prior years financial statements and any projections or other financial information
• Prior accountants working paper files
• Tax returns
• Accounts receivables
• Facilities
• Condition and age of inventory
• Unrecorded and outstanding liabilities

Conducting due diligence at this level will be an important step towards two partnering companies moving forward with an extended relationship beyond a 2010-related contract.