My Business Partner’s Business – Not My Business?

Knowing your business partner – whether it is your supplier or your client – is crucial for your company’s success today. If you disagree, you are free to put your company’s reputation in the line of fire, but you should at least be aware that the potential legal consequences are severe. Let me elaborate a bit more.

The Law Sets the Bar

First of all, we have a bunch of legislation in place both domestically in Finland and internationally that requires you to check the backgrounds of your business partners. Business deals that look good on paper may actually be illegal.

When the Law Remains Silent

What if the law does not require you to do a background check of your business partner? Should you still conduct one or just chase the biggest sales and profit figures of the quarter?                                

There is no one-size-fit-all solution to this question. However, I urge companies to seriously consider taking into account the reputation of their company in the long-run and stakeholder expectations for overall responsible business conduct. It comes down to the management to draw the line with respect to how they want profits to be generated and business to be conducted.

Business partner background checks can be necessary even in the Nordic context. When carrying out these kinds of checks, we have come across, e.g. links to financing for jihadists and the mafia. In addition, one interesting case involved what is called a ‘vanishing company’, which is a company that collects money from the public and then vanishes. The direct benefit of these background checks is, of course, peace of mind for management, who can be confident they know who they are dealing with.

Strengthen Your License to Operate

What is different from the past is how and where your profits can be made while still maintaining your sustainability license to operate. Risky scenarios should be always identified and mitigated.

If needed, companies should have the courage and business incentive to call off the deal if necessary to safeguard the company’s long-term reputation and sustainable sources of business profits. Your business partner’s business is, therefore, unavoidably also your business concern.