Natural-born detectives

PUBLISHED : Saturday, 20 September, 2008, 12:00am
UPDATED : Saturday, 20 September, 2008, 12:00am

Demand for specialists to conduct due diligence, probe fraud and handle crisis management is growing in Asia

All businesses carry an element of risk, especially those in the finance industry. This has led financial organisations to keep risk to a minimum by outsourcing the services of specialist financial risk consultancies.

Financial risk incorporates anything that can have a negative impact on direct business results from a financial point of view - directly and indirectly.

'Financial risk consulting is a slightly misleading term because it is not just about financial risk but about business operational risk,' said Peter Humphreys, the founder of ChinaWhys, a risk management consultancy focused on the mainland, and the founding president of the China chapter for the Association of Certified Fraud Examiners.

'Companies that operate in this area are focused in different ways with emphasis on different areas of risk - some on due diligence, some on fraud investigation, and some on physical security and crisis management.'

Demand for all of these professional services is burgeoning in Asia, with emphasis on China. The mainland has experienced growth in recent years due to endemic problems with fraud and corruption.

Work is expanding as is the number of players offering financial risk consultancy services. One knock-on effect of such growth is the challenge of attracting, developing and retaining staff.

'It is pretty difficult to find the right talent,' said Jack Clode, the Hong Kong-based managing director of Kroll, an international risk consulting company. 'You've got to have people from an education system that encourages lateral thinking, and getting people straight out of university who really have that investigative mind is very difficult.'

The industry is, therefore, constantly baying for fresh blood.

Mr Humphreys said, however, an impressive educational background was not fundamental to building a career in this profession.

Instead, would-be financial risk consultants should have natural talent with inquiring minds. Recruits often have a background in journalism or law enforcement, or are accountants who fancy a more investigative role.

Because 80 per cent to 90 per cent of records are saved on digital devices there is much scope for information technology specialists in areas such as computer forensics.

'If anyone is going to work in this field in China they really have to be very cross-cultural,' Mr Humphreys said.

'All of my staff have good English and Putonghua because they are dealing with western clients, reporting in English and working in Chinese.'

Any bank, manufacturer, service provider or logistics business is vulnerable to certain threats, and companies providing these services help corporations mitigate these threats or resolve crises.

'Manufacturers are particularly vulnerable as they have such complicated and detailed value chains, which are vulnerable to fraud and intellectual property losses,' Mr Humphreys said.

According Mr Clode, the development of the financial risk business on the mainland and in Hong Kong is client driven. As long as financial institutions have been operating in the region, they have needed to go to external providers who are specialists with risk consulting skills. 'It started with classic investigative fact finding ... and has clearly moved on massively since then,' Mr Clode said.

Frank Hawke, Kroll's chairman for Greater China, said: 'All aspects of business in China are becoming more liberal for the most part, which means that there's more risk and more opportunity.'

One of the challenges of carrying out business on the mainland is dealing with cultural and linguistic differences.

Mr Humphreys said that bridging the cultural gap was important if a business was to solve fraud on the mainland, for example when interviewing suspects.

Financial risk consultancy is often given to western multinationals with problems to solve or challenges to overcome.

'A lot of problems have arisen because of cultural differences, where head offices are often blind to what's happening on the ground with their business in China,' Mr Humphreys said.

'Many companies in China have to overcome the theft of technology or fraud problems, for example, and really struggle to fight back and win a case.'

One approach is to focus on operational risk - helping to prevent clients getting into fraud situations in the first place as much as assisting them with unravelling tricky situations. The transience of financial sector clients who move between firms and locations fairly frequently means that client care is increasingly important.

Mr Clode said that because people were so mobile it was necessary to spend a great deal of time on building relationships with individuals and, more broadly, with client firms.

Key players


Risk investigator

IT specialist

Associate director

Managing director



Reputational due diligence research into an individual or company to determine their background to ensure there is no poor business performance history or bad reputation

Scope articulating the background to the case, determining the type of investigative methods to be used and providing a time frame, reporting requirements and budget for the client

Forensic accountant an accounting detective who examines accounting records to find evidence in support of an investigation or, for financial crimes, finds and reconstructs unusual financial transactions

Intellectual property this is often intangible as it is an idea that has a commercial value

Human sources someone who is a source of information for investigators and may be knowledgeable about an industry sector, person or company