Navigating Due Diligence in Emerging Economies 

Introduction

Working on due diligence investigations in emerging economies mean our days are never boring and never the same, from working on different subjects, languages, or jurisdictions. As a team, we aim to maintain an outstanding and consistent reputation for excellence, integrity, and success. This is only possible because we pay close attention to changes in the global market and work together to deliver the highest level of professional support to our clients. 

However, what happens when we are entrusted to produce a report from a country considered an emerging economy? In this article, discover the intricacies of conducting due diligence assessments in emerging economies and the unique challenges they present.

Defining Emerging Economies

The term “emerging markets” remains undefined. However, it is recognised as a developing nation with low income and fast growth. These countries use economic liberalization to promote their economic development. In other words, their governments have removed restrictions and regulations in the economy to promote a free market approach, which will promote competition and help their economies grow. These emerging economies fall into two categories: those developing countries in Asia, Latin America, Africa, and the Middle East, and those classed as ‘transition economies’ in China and countries that were part of the former Soviet Union.

Opportunities and Risks in Emerging Markets

As these economies develop, they will inevitably become more involved in the global markets. The trade volume will increase with the foreign direct investment. Some advantages of having assets in these countries are that they often offer attractive returns to investors over the years. Emerging markets are expected to adopt the same reforms that established markets have implemented, which could potentially expose investors to various risks, including political instability, currency volatility, and domestic infrastructure issues. These markets strive to comply with the standards of developed economies like those in Europe or the United States of America.

Challenges and Strategies

1. Conducting due diligence investigations before investment, acquisitions, or recruitment mitigates potential threats, safeguards reputations, and enables informed decisions.

2. Navigating less structured regulatory environments and assessing political stability pose challenges in emerging economies.

3. Accessing reliable information sources and verifying legitimacy requires extensive local expertise and networks.

4. Tailoring investigation strategies to suit both client needs and jurisdictional nuances is essential for success.

5. Adopting a collaborative approach combining cultural sensitivity and technology helps navigate complexities effectively.

Due Diligence Investigation Process

We go above and beyond to provide premium independent analysis reports for our clients. Our due diligence review includes

• conducting interviews with key individuals
• assessing legal and regulatory compliance
• examining financial records
• international background checks

This process involves leveraging all sources available to gather information that aids us in identifying any risks or opportunities that could impact our clients.

Due diligence investigations demand a meticulous and thorough approach. It can be more or less challenging depending on factors such as the jurisdiction in which the investigation needs to be conducted.

Contrasting Environments: Established vs. Emerging Economies

For example, in the United Kingdom, due diligence has a more established legal framework, regulatory environment, and access to reliable open information sources. It facilitates information gathering, and a much more transparent assessment process is usually similar in all established economies worldwide. The degree of success varies in the collection of information from official channels of communication.

In contrast, conducting due diligence investigations in emerging economies presents additional challenges. It includes navigating unstructured regulatory environments, assessing political stability and potential corruption risks, and dealing with the potential unavailability of reliable information.

TenIntelligence Thoughts

Due diligence investigation in emerging markets requires more extensive local expertise, networks, and reliable resources to gather information and verify its legitimacy. Nonetheless, tailoring the investigation to suit our client’s and the jurisdiction’s needs is one of our many skills. Our multicultural multilingual team is proficient in adapting research strategies to the nuances of emerging economies. We adopt a collaborative approach that combines cultural sensitivity and technology to help navigate the unique challenges and complexities of due diligence in emerging markets effectively.

Submit your request to learn more about Tenintelligence’s due diligence solutions or reach out to our experts at  info@tenintel.com.