How the risk consulting firm is seeking to grow market share and profit

1. Kroll Moves
To Grab Market Share
In Due Diligences
By Andrew Marshall of Consultifi, 27 April 2011
Kroll has realigned and repositioned its due diligence services. The US-based risk
consulting company aims to capitalize on what it sees as a very fast growing and
lucrative market, but also to protect itself against trends that could undercut its position.
For competitors, this presents strategic risks and opportunities.
The company issued a press release on 20 April on the shift. It called it “the launch of an expanded suite of Due
Diligence solutions that provide clients with the ability to meet all of their evolving compliance, regulatory and
information needs.”
Due diligence is a term that has its roots in US investment circles, but it has come to be shorthand for most forms of
systematic check before a large business transaction or new relationship: buying a company, investing in one,
forming a joint venture, hiring a senior member of staff, taking on a new sales agent or vendor, or bringing on board a
significant new client. It usually implies both a check of the public record and some form of reputational inquiry, either
through a media check and/or by person-to-person conversations. There is no accepted estimate of market size or
even definition; the term is used in legislation but means different things to different people.
As Kroll notes, regulatory initiatives should mean many more companies are seeking to conduct different forms of
DD, and for many types of business transaction. “The new offerings are specifically targeted to satisfy know-your-
customer (KYC), anti-money laundering (AML), global FCPA/UK Bribery Act and Third Party Vendor screening
regulations, and utilize people, process and technology to deliver client solutions in a time- and cost-effective way.”
The initiative behind this is the addition of Altegrity Risk International and its “next-generation, technology-driven due
diligence solutions” to Kroll’s existing services. At the premium end of the market, Kroll has long provided reputational
and investigative due diligences to financial institutions and corporate clients, often in the context of M&A. It has a
plausible case to have invented this market in the 1980s, and its reports are still considered a benchmark. But these
price at around $5,000 and are not always considered appropriate for firms that are assessing clients, sales agents,
account openings or new hires rather than acquisitions. Other competitors can deliver for much less, though Kroll
professionals would say that they do not cover the ground as systematically and that they cut corners.
At the product end of the market, Kroll has long had a Background Screening Group that conducted database-driven
screening inquiries with the consent and knowledge of the subject. The company had tried in vain for some years to
develop an indigenous product called “Capital Intelligence” that bridged the gap: lower cost, technologically driven,
using mainly open source public data. But internal schisms between the competing groups, combined with the
inherent problems of mixing production and sales models, had prevented this from ever taking off.
The Consulting Services Group had been working for three years to shape a new set of services, aligning each
offering, integrating them and offering them globally. Altegrity’s acquisition of Kroll provided the entity to help them do
this (ARI) and has removed some of the internal obstacles. The market is cyclical, and plunged in the wake of
financial problems in 2008-9; but it has recovered in the last twelve months, and Kroll will be hoping to establish its
new services as companies brush the dust off their expansion plans. It wants more market share and more profit.
If it works, this is a defining move for the company. It means that it can integrate products and work across borders to
service large clients with significant DD demand: financial services and corporates with high risk profiles like defence
companies, infrastructure and engineering, pharmaceuticals, extractive industries and even some technology
companies. “These expanded due diligence capabilities reflect the firm’s commitment to helping clients deal with
escalating regulatory and compliance requirements, as well as to supporting their drive to explore expansion
opportunities worldwide, particularly in emerging and high-risk markets,” said Kroll.
Kroll recognizes that the DD market is moving towards a more scaleable, technology driven solution that focuses on
speed and cost. “We have succeeded in merging the best of technology innovations with unique intelligence
Contact: Andrew@Consultifi.com +1 202 590 8461 or +44 7730 700330 www.Consultifi.com

2. networks, proprietary databases and investigative prowess,” said Lee Spirer, senior vice president and global head of
Kroll Risk & Compliance Solutions. “The result is that clients can work with us in the way that best meets their needs,
either through the traditional advisory relationships, or via an online platform that creates the clear and auditable
process and data that are critical for satisfying regulatory requirements.”
This is a long way from the investigative, advisory, service-oriented vision that the company championed in the 1980s
and 1990s. There is still a culture clash within the company and one risk is that Kroll’s execution of this range of
services will be uneven. A second risk for them is brand: do the new services align with the company’s focus on high
quality, high cost, low-leverage work like financial investigations? A third is cost: there are companies that will do this
work less expensively if less well, and it requires investment in technology. Can Kroll get and keep the ten or twenty
key relationships it needs to make this investment pay?
These present obvious opportunities for some of Kroll’s competitors:
- Several firms already trade on what they present as Kroll’s evacuation of the high-end market. They will
continue to claim that they can provide the high-quality work required in emerging markets in particular.
- At the low-cost end of the market, technologically-driven providers will aim to undercut Kroll and other
providers by selling basic public data with low analytical input. For many companies this may suffice, and
Kroll’s higher overheads means it cannot compete here (nor would it want to, necessarily).
- In the middle market, where it is heading, Kroll will need to invest in brand, sales, marketing and account
handlers, as well as technology. Existing strong brands in the information and data market may have
strengths that Kroll lacks.
But there are also risks for firms that compete: Kroll has a good name and a good track record and it has
relationships with the top tier of investment banks and corporates. Hitherto it has been less than systematic about
handling these relationships globally and it has not always been focused on product and service innovation. Now, it
may take large accounts from firms that depend on them for their market survival.
The due diligence market is likely to evolve in complex ways in the next decade:
- The primary driver is growth and cross border investment, and that is reviving. Emerging markets are
shaking out in different ways and firms are exploiting opportunities in China, India, Africa, Latin America and
the Middle East.
- Compliance and regulation needs are not as straightforward as they looked a year ago, with the shelving of
the UK’s Bribery Bill, but FCPA remains a significant focus for many companies. The outcome of probes into
politically-exposed persons in the Middle East, crackdowns on offshore jurisdictions and initiatives on
corruption may raise new challenges.
- Clients want a range of services and products and they want them better integrated into their operations.
- New providers are constantly emerging: service firms, accountants, security firms, data and information
providers, technology suppliers… and new joint ventures and partnerships are likely to surface.
Kroll has made the decisions that help position it for a shift in this market, though it remains to be seen if it can follow
through. Others have already moved and will be seeking to find the sources of value in a rapidly developing market.
Andrew Marshall is Director of Consultifi. He works on business strategy, marketing, communications and risk, and is a
former head of Business Development and Strategy for Kroll’s Consulting Services Group.
Contact: Andrew@Consultifi.com +1 202 590 8461 or +44 7730 700330 www.Consultifi.com