Due Diligence Failure: Business Disasters of the Third Kind

Stylish Office Hedge Fund Start Up


Due diligence is a hot topic in hedge fund management. The process is becoming increasingly demanding and can last as long as six months. That’s a lot of valuable time to have invested in non-core activity if it comes to nothing. There is no requirement for the potential investor to inform the hedge fund manager of the failure, let alone what the cause was, so silence may be all one gets for half a year’s work.

Transparent Compliance

The potential client wants to see managers with a record of achievement, asset classes that make sense and a sustainable investment model. Supporting the unique selling points they need to see a suitable business structure supported by appropriate technology. All elements of infrastructure need to work in a way that is transparently compliant not only with the clients’ appetite for investment risk exposure but also with the regulations that control their industry. Achieving FSA compliance levels on business continuity, email and voice recording needn’t be onerous. It guarantees maximum operational ability whilst optimising investment appeal and creditworthiness.

Disaster Recovery

Technology is integral to modern business and is, therefore, a key factor in due diligence. A robust disaster recovery strategy is your answer to the question “How do you achieve business continuity when faced with a calamitous, unforeseen event?” Disasters fall under two main categories; man-made, which include civil unrest and careless workmen, and natural, which include floods, earthquakes and pandemics. In either case the result is servers, computers and mobile devices which cannot be used or, worse still, are lost with the data they contained. For an information-based business the loss of data leads to business failure in the majority of cases.

What would your business do?

A disaster recovery strategy is not the preserve of huge corporates. In fact, one could say that the less sites one’s company has the more critical it becomes. A successful disaster recovery plan requires robust equipment and processes supported by comprehensive documentation. With virtual server space available in “The Cloud” the back-up plan does not require excessive surplus hardware. Typically the cost would account for 2-4% of the IT and Telecom budget. In fact, it may be possible to structure your IT and Telecom infrastructure in a way that reduces costs, increases reliability, improves operational efficiency and tightens security whilst still satisfying business continuity requirements.

Take Action

Disaster recovery planning protects your business against man-made and natural disasters enabling you to focus on core business and grow funds year on year. You may think these disasters “couldn’t happen here” but documented disaster recovery plans also protect against a third, silent threat: the loss of investment due to failed due diligence. That turns disaster recovery from a “nice to have” to a business necessity.