The tie-up aims to combine Kroll’s ability to gather primary source data with BMR’s experience in financial record analysis to provide clients with more accurate information when conducting an investigation or evaluating investment opportunities.
Directly addressing corporate India’s reputation for corruption and recent attempts to beef up corporate governance, Kroll India’s country head Reshmi Khurana says “In India, companies cannot rely on the financial information that employees, vendors and investment targets provide them since corporate governance standards in India are still evolving and accounting and auditing standards have not fully matured. This allows employees, vendors and companies to take advantage of the poor control environment to manipulate financial information.”
“The internal and external review elements are only valuable if there are no conflicts of interest amongst the due diligence providers and investigators and the sanctity of the investigation is maintained. Both Kroll and BMR are independent. This puts both companies in a position to conduct due diligence and investigations on a no-compromise basis which results in truly independent advice” adds Sanjay Mehta, partner and leader of BMR’s Risk Advisory Practice.
According to Kroll’s 2013 Global Fraud Survey, India has a widespread, “multi-faceted fraud problem”, with fraud affecting more than 15 per cent of the country’s companies, and an above-average percentage of information theft, with 24 per cent of companies reporting such cases.
“The slowdown in the market has increased the pressure on portfolio companies to meet the covenants set by the private equity investors and this contributes to PE-promoter conflicts. Secondly, private equity capital is still treated as one more source of capital by promoters, as opposed to a strategic partnership” says Khurana, noting that these factors are directly linked to fraud and conflicts in portfolio companies.