Security has price - How and how much does it cost to check potential investor?

The Americans in Serbia are building the world biggest solar park while the Emirates-based company headed by Hindoo invests in road infrastructure and develops our construction. These are just a few huge investments lately.

Nothing is going to happen with the solar park. Apart from that, Securum Equity Partners which terminated an agreement with the Government is asking for the a compensation totaling EUR 160 mil. Allegedly, Serbia did not fulfill obligations proscribed in the agreement stipulating provision of location of 3.000 ha for the construction of solar powerplant with 1.000 megawatts.

The second side of the story implies that our Government did not study neither the contract nor the investor sufficiently enough since only now did we find out that the project was unrealistic from the start.

The most irritating about the whole thing is the fact that if the government is not capable of checking upon an investor, what should ordinary businessmen expect. The second question which arises is how complex and how costly is the check procedure for a potential investor?

Everything is discovered in a couple of days

In the leading credit worthiness companies which we have contacted, they day that the procedure is more or less simple and that it takes only a couple of days.

Thus, Belgrade-based Rating exclusively represents the oldest credit worthiness company in the world, Dun and Bradstreet (D&B) in the territory of Serbia and Montenegro which enables its customers direct access to the largest business database in the world which contains more than 220 million companies from almost all countries in the world (over 200 countries).

Director of Rating, Ljiljana Cupara, says for eKapija that great advantage of D&B solvency reports is the fact that solvency rating is carried out in line with the equal methodology which makes companies comparable regardless of the part of the world they are from.

She added the procedure for check takes 3-4 days on the average for majority of European companies while the average is a bit higher for the rest of the world (7-8 days).

In the Coface company, they explain that their internal methodology of check is based on the basic indicators: financial reports along with accompanying audit opinion, data on organization and company business model, its management, ownership structure, industry, current and expected market position. Monitoring implies control of bank accounts, court trials,payment collection cases.

- Simply put, check means every important segment of the entity existence and operations, starting from the basic information on address,contacts, owners, related companies, industry, financial indicators, business accounts to general features of the industry within which the company operates and economic situation of a country. Media writings are also monitored –Djordje Zivanovic, director of the Coface company in Serbia says for eKapija.

Security has prive

Although they say that security does not have price, still, it is clear that when it comes to new agreements and cooperation, especially with foreign companies, this expression is not right. The price of a check of a potential investor depends on geographical location, i.e. the country the company is registered n as well as on the speed of the solvency report delivery.

- For majority of the European countries, in normal delivery speed (avg. 3-4 days), the reports prices totals some EUR 80. Prices are a bit higher if it is about and urgent report of is a company is from geographically distant states – director of the solvency company Rating says.

Coface charges reports from EUR 22 to EUR 200, depending on the country. Director Djordje Zivanovic says the number of frauds in the crisis times is on the increase, especially if a country is poor and with a a high corruption rate where laws are not implemented and where business moral is at the lowest level.

Aleksandar Miloradovic, an adviser in the Serbia Investment and Export Promotion Agency, (SIEPA) says that a large number of companies turn to then, among which there are companies or individuals who were trying to speculate. However, he mentions that due to checks of investors, so far they have not started a project with such a company.

- On the other hand, there were those who enter with unrealistic plans or who have been struck by crisis too much, with whom we have, according to a procedure, terminated contract and in cases of paid subsidies charged for banking guarantees which they are obliged to deliver to us as anticipated in the contract – Miloradovic says.

SIEPA starts company check via Internet. They check their web site,new and texts on the company which are available on the Internet, annual reports, etc. Then, they check these companies through other companies they already cooperate with and are from the same country and branch. They carry out check through partnership organizations from these countries or countries the already invested in. It is not a rare thing that they organize direct visits to a company.

For the mentioned case of the “solar park” which obviously will not be implemented, Miloradovic says they have heard it in media and that they do not have all necessary information.

- However, from the initial media announcements of the mentioned investments,i.e. indicators which have been stated, it was necessary to check an investor thoroughly. Simply, when somebody asks for 3000 ha and promises EUR 2 billion, which would be the biggest investment in Serbia ever, it was at least necessary to see a smaller part they have already built. Information on a very poor company web site and addresses on the Cayman Islands were an additional reason to be careful – our collocutor says.

(Photo: ekapija)

Spider net

The thing that may be new and what the companies both in Serbia and in the region offer is the service of the “spider net”. It is actually graphic connection of companies, owners, shareholders and mangers which shows “who and how is related”.

- An insight in the capital connection of companies is important for a number of reasons. If a parent company is estimated as a high-risky one,it will definitely negatively affect the risk of the monitored daughter company and vice versa, of daughter companies are risky, an observed parent company gets negative grades. Connection of companies, i.e. company tree cans contribute to more efficient business. For instance, if your buyer is in a capital sense connected to your supplier you own, you can continue business with a supplier with additional benefits (extended payment deadline, higher loans amount or continue business on the basis of compensation) - Ljilja Cupara from Rating explains.

At the same time, the solvency company Bonline, which is a sister company to Rating, provides this kind of service in Croatia so it is not difficult to reach the results and see who and how is connected in the region.

Jelena Djelic