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In business activities and transactions the focus is often on tangible figures, although “soft” factors are often equally or more important. Environmental and social management schemes identify related intangibles in business operations, making them subject to fact‐based decision making. The applicability of these schemes is reduced when confronted with new situations such as mergers, acquisitions, and other asset transactions. Here due diligence (DD) procedures review factors deemed material to such a transaction including, since recently, also environmental and social ones. The purpose of the paper is to describe and conceptualize a DD procedure addressing social and environmental factors.

The paper describes an indicator‐based algorithm for the systematic identification of social and environmental risk factors in asset transactions. The application of the method is demonstrated and tested by example of case studies.

The paper presents and discusses an environmental and social DD procedure. The performance of the procedure is discussed on the basis of concrete case studies.

The DD‐method is applicable in a wide range of firms operating in cost‐driven markets for identifying social and environmental risk, putting a price tag on it, and thereby enables the firm to manage it.

Starting from fieldwork by one of the authors the paper introduces formally a social and environmental due diligence procedure.

This paper aims to examine the approach of UK institutional funds to considering flood risk to property investments in the light of their fiduciary duty, the widespread floods in 2007 and 2010 and the predicted increase in future incidence due to climate change. It explores the due diligence process and the challenges to investment decision-making and to property valuation. The case is made for further research to establish the extent of UK investment property potentially at risk from flooding, the degree of risk exposure and the way the risk is translated into valuations.

A comprehensive literature review informed the design of interviews with senior managers in major investment funds, their professional advisers and other stakeholder representatives, including environmental consultants, valuers, solicitors, lenders and the insurance industry. Case studies illustrate how the due diligence process is used to identify risks, inform purchase decisions and devise mitigation and management actions.

Property represents about 4 per cent of investments managed in the UK, but there is no clear picture of where and how much could be at risk of flooding. There is a common false assumption among investors that risk levels are unlikely to change and a reluctance to expose an otherwise hidden problem.

Property is an important diversification asset in investment portfolios, underpinning individual pension, insurance and savings plans. Prior research indicated flood risk to commercial investment property was under-researched; a need for awareness raising; and for guidance relevant to investors and their professional advisers.

This study aims to provide the main contents of the revision of the 2023 OECD Guidelines for Multinational Enterprises and suggest implications for the Korean government and multinational enterprises.

Following the brief history of the revision of OECD Guidelines for Multinational Enterprises, this study reviews and evaluates major substantive and procedural revisions of the 2023 OECD Guidelines, and then suggests countermeasures for Korean government and businesses.

The most significant substantive change of the 2023 revision is that expectations for environmental due diligence and disclosure obligations, including climate change and biodiversity, for multinational enterprises have been expanded and strengthened. Regarding procedural changes, the biggest change is the introduction of a basis rule for the National Contact Points for Responsible Business Conduct (NCPs for RBC) to judge each issue and a rule that the final statement must include follow-up details and deadlines, which is expected to strengthen the effectiveness of the NCP dispute resolution mechanism.

This study is the first academic paper to introduce major substantive and procedural revisions to the 2023 OECD Guidelines for Multinational Enterprises in Korea. This study also provides implications for the Korean government and companies following the 2023 revised OECD Guidelines for Multinational Enterprises as follows. First, the Korean government must establish a public–private partnership to closely communicate to prevent Korean companies from being harmed by failing to meet strengthening international Environment, Social and Governance (ESG) standards. In addition, Korean government should actively participate in ESG-related international forums, including the OECD, and strive to reflect the needs and interests of Korean companies. Second, the Korean NCP should strengthen its activities to prevent potential damage by expanding education and promotions for Korean businesses on related overseas legislative trends and NCP dispute case studies so that Korean companies can effectively deal with the strengthened ESG standards. Third, Korean multinational enterprises should preemptively establish an advanced ESG management system to seize new opportunities in the global supply chain previously concentrated in China and India in the process of reorganizing global supply chains according to the trend of strengthening ESG standards and the US value alliance strategy.

According to several authors 50 per cent of mergers and acquisitions (M&A) operations destroy value. The aim of this paper is to study the reasons why it happens and to seek to reveal that intangible assets, which are increasingly important in today's economy, must be better assessed during the due diligence phase.

The authors present a part of the French intangible assets measurement approach, which has been published by the French Intangible Assets Observatory. The methodology proposes an extended balance sheet which is an interesting addition to the IAS‐IFRS intangible standard. It identifies 12 classes of intangible assets including human capital and customer capital.

The paper proposes a due diligence approach, using the French methodology and applies it to the insurance sector.

This paper is not an academic paper. However, a significant research program is now underway in France. Academic publications are expected to be submitted.

The practice of intangible due diligence is a key issue in today's increasingly intangible economy. This practice is on the verge of a very strong development.

The paper presents a systemic approach to intangible assets. It answers a key question: what are the main assets that are necessary to start and continue a process of value creation? Accounting only recognizes the intangible assets that are not overly volatile, for prudential reasons. But even if customers or teams are “too intangible” for accountants, they are required to generate cash flows. If they are not evaluated, the process of wealth creation is not under control. This is crucial in M&A.

Impact investing, Social entrepreneurship.

MBA, EMBA, Executive Education.

CareCross Health describes the impact due diligence leading up to an investment into CareCross Health by impact investor Palm Capital. The case follows the protagonist, Caitlin Stevens, CEO of Palm Capital, as she identifies CareCross Health as a potential investment target, performs an initial screening of the company and visits the company and its sites as part of an in-depth impact due diligence.

By the end of this case, the student should be able to consider the critical steps associated with conducting an impact due diligence; understand the challenges associated with conducting an impact due diligence, with a particular focus on due diligence in an emerging market scenario; analyse a potential impact investment, in this case CareCross Health, and make a preliminary recommendation on whether the investment is viable from an impact perspective; identify the trade-offs between private sector and public sector provision of services to low-income groups, and consider unintended consequences in analysing the impact of a social enterprise; and prepare possible scenarios and weigh the potential outcomes of various arrangements to ensure alignment of investor objectives.

Teaching Notes are available for educators only. Please contact your library to gain login details or email support@emeraldinsight.com to request teaching notes.

CSS 1: Accounting and Finance.

To educate on AML legal requirements and issues relative to foreign correspondent accounts, and give practical advice on relatively low-burdensome measures firms can take to help them achieve compliance in this challenging area.

Summarizes AML requirements relevant to foreign correspondent accounts, discusses two related FINRA settlements involving the alleged failure to obtain and verify beneficial ownership information, reviews ongoing regulatory and legislative initiatives (including a FinCEN initiative to require firms to identify beneficial owners and verify their identities), and suggests certain due diligence procedures firms can use to screen foreign correspondent accounts.

One of the fundamental risks that firms face when dealing with foreign correspondent accounts is not knowing their customers' customers. While the current regulatory framework does not, in most cases, explicitly require firms to obtain beneficial ownership information, the practical reality seems to be that obtaining and verifying such information, where possible, could pay substantial dividends in terms of risk assessment and avoidance.

In some cases, a variety of cost-effective screening measures can be sufficient for a firm to identify concrete risks so that it may take steps to reduce its own regulatory exposure. Firms should not discount the simple for the elaborate, and should take advantage of the several, cost-effective AML tools and resources that are readily available.

Practical guidance for AML officers and other compliance and legal professionals by an experienced financial institutions lawyer.

The potential for resource combinations to have adverse consequences for acquiring firms is often overlooked in research. However, considering potential inimical resources can explain target and acquiring firm actions across the phases (evaluation, completion, and integration) of an acquisition. The authors outline how managers deal with inimical resources in acquisitions. Specifically, during evaluation, due diligence offers managers from acquiring firms the opportunity to avoid potential inimical resources by abandoning an acquisition. During integration, inimical resources can be dealt with either by limiting integration, or with planned or unplanned divestment. As a result, inimical resources explain observed actions and provide a context for making and improving corporate restructuring decisions.

This study aims to investigates the challenges faced by Pakistani financial institutes (FIs) and regulators in implementing robust customer due diligence measures.

The study adopted a qualitative technique. Twenty-five semi-structured interviews with chief compliance officers and regulators were conducted.

The study concluded that the main challenges are name screening, obsolete nature and quality of databases and undocumented, unregistered and unregulated portions of the economy and society. In addition, identification and verification of high-profile customers and beneficial owners, lack of specialised staff and cost of compliance are the significant challenges faced by FIs in Pakistan.

The Pakistani financial sector is less researched on anti-money laundering front, especially concerning customer due diligence. Further, the social, cultural and economic norms of the Indian sub-continent are more or less the same. Therefore, the study findings could be generalised to the region.

Due to the high failure rate of the M&A strategy, this paper aims to raise the question of whether the pre-M&A performances could predict integration success in cross-border M&As with the aim of reducing the integration risk. Cross-border M&A is considered an important strategy for gaining access to foreign markets, but at the same time, cross-border M&As involve a high risk for failure, particularly due to the problematic integration stage in cross-border M&As.

The study presents a research model that includes six pre-M&A performances – the revenue and profitability of the acquirer and the target, the revenue ratio and profitability ratio – with the aim of analysing if the pre-M&A performances could predict integration success. The sample of the study includes 68 public firms that were engaged in cross-border M&As from 13 countries. The database of the study is based on 272 annual reports (10-K) of the public companies that are included in the sample.

The results show that the revenue and profitability of the acquirer and the target predict integration success. However, the revenue ratio predicts integration success, but not the profitability ratio. The results also show that a larger target leads to a complicated integration process that ends in a failure of the integration stage, while a larger acquirer could help to facilitate the integration stage. The study also indicates that buying a small target in relation to the acquirer decreases the risks of the integration stage. Moreover, the pre-performances of the acquirer more predict integration success compared to the pre-performances of the target.

The study suggests that buying an inefficient target creates opportunities for removing redundancies, while buying profitable target may hinder the possibilities for eliminating duplicate jobs and operations. This mixed effect highlights the challenges in implementing of M&A strategy in cross-border-M&As.