The saying “Tell me who you’re with, and I’ll tell you who you are” is perhaps one of the most widely recognized and frequently repeated phrases in the Spanish language. It appeared in the influential Spanish novel “Don Quixote” by Miguel de Cervantes. It serves as a cautionary statement, suggesting that people’s behaviors and thought processes can be deduced based on their companions, clothing choices, preferred locations, and general demeanor. In essence, it implies that our associations and outward expressions offer insight into our personalities and approaches to life.
The saying that was spoken by Sancho Panza who was the faithful servant and squire of the main character Don Quixote, though applies to friends and social circles, looking at this through the lens of whom you choose to do business with is equally important.
Connections and interactions between individuals or entities within the context of a business or professional setting can occur between various parties, including employees, employers, clients, suppliers, partners, investors, and stakeholders.
In business, when you tell me with whom you associate, I will tell you who you are.
Some Numbers Don’t Lie
According to a Stanford Law School chart, from 1977 to 2022 approximately 90% of Foreign Corrupt Practices Act (FCPA) cases involved the actions of third-party intermediaries such as agents, consultants, distributors, business partners or contractors. Third parties may engage in bribery or kickback schemes to secure business deals or gain preferential treatment.
Third parties may be involved in so many risky situations:
- They may have undisclosed ownership structures or hidden affiliations that create conflicts of interest, and can compromise the integrity of business transactions and decision-making processes.
- They may engage in influence peddling or improper lobbying practices to manipulate legislation, regulations, or government decisions in favor of their clients, and can undermine transparency and result in preferential treatment or unfair advantages.
- They can be involved in money laundering schemes or fraudulent activities, which can have significant legal, financial, and reputational consequences for companies that unknowingly engage with them.
Nevertheless they can simply be untrustworthy and behave unethically in many aspects.
Know Your Business Partner Before You Sign
To mitigate these risks, companies and individuals need to perform robust due diligence processes with any third party.
Companies must establish clear contractual obligations and conduct regular monitoring and audits.
Before entering into a business partnership, it is crucial for an individual to exercise diligent efforts in assessing the potential partnership. The level of verification required may vary depending on the nature and complexity of the partnership, but some key considerations include:
- Research and market analysis.
- Background checks.
- Compatibility and shared goals.
- Legal and contractual considerations.
- Financial due diligence.
- Communication and transparency.
- Professional networks and references.
Think Beyond Reputation
Vetting your business partners allows you to ensure that the people you do business with have been compliant with the relevant laws, regulations, industry standards that govern your respective industries, and ethics. In addition to the reputational damage your company could incur, you also have to consider more tangible effects, such as possible legal liabilities that land on you due to your association with other companies or individuals that are non-compliant, non-diligent, unethical.
As a business owner or executive, there are always risks. Some risks are manageable and can be mitigated, others are not. Lack of integrity cannot be controlled.
Would you be ready to work with someone based only on what you’ve heard about their reputation or will you do your homework and build your own impressions?
Regardless of the reputation that you believe precedes them, your company or you as an individual must properly vet every employee, investor or partner you intend to do business with. This extends to hiring and partnering with other organizations, suppliers, and third-party vendors (consultants, representatives, agents, attorneys, accountants, financial advisors). Their values speak to your values. When you and your business are associated with reputable and trustworthy entities, it speaks to your ethics and integrity.
Don’t be shy, don’t be lazy, don’t rush. Do take some time and courage to read between the lines.
Partner with the Right People
At Prae Venire we are focused on assisting professionals with navigating the immense challenges of maintaining compliance. We have developed partnerships with reliable due diligence and background check firms. After we learn about the risks you face, we will work within your budget to find the right solution for your corporate compliance program. Contact Prae Venire to set up your consultation.