Due Diligence Research Articles

Main contents and implications of the 2023 revision of the OECD Guidelines for Multinational Enterprises*

Purpose 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.Design/methodology/approach 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.Findings 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.Originality/value 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.

Deal or no deal for mergers and acquisitions

Purpose This paper aims to review the latest management developments across the globe and pinpoint practical implications from cutting-edge research and case studies. Design/methodology/approach This briefing is prepared by an independent writer who adds their own impartial comments and places the articles in context. Findings Companies typically face considerable barriers when embarking on cross-border mergers and acquisitions (CBMAs). By exploiting past takeover experiences and conducting effective due diligence during the pre-deal stage, acquiring firms become better positioned to overcome barriers such as those associated with cultural and institutional divides. Originality/value The briefing saves busy executives and researchers hours of reading time by selecting only the very best, most pertinent information and presenting it in a condensed and easy-to-digest format.

THE ‘HIGHEST POSSIBLE AMBITION’ ON CLIMATE CHANGE MITIGATION AS A LEGAL STANDARD

Abstract The Parties to the Paris Agreement have committed to communicate successive ‘nationally determined contributions’ (NDCs) to the global response to climate change. Each NDC is expected to reflect the Party's ‘highest possible ambition’ (HPA) on the mitigation of climate change. This article envisages the possibility of taking HPA seriously: that is, of approaching it as an effective legal standard. It shows that, in some circumstances, the HPA standard can help to assess whether a State has complied with due diligence obligations on climate change mitigation.

Ecological Factors in Public Procurement and Corporate Sustainability Policies

European Institutions and scholars are reflecting upon the nature of the requirements that are or can be used to implement sustainability through Public Procurement. As far as public organisations are concerned, the Portuguese government's actions are in the same wavelength as the European guidelines on the matter. Public procurement involves economic operators. Thus, it is important to try to understand if the European Union proposal for a directive on "Corporate Sustainability Due Diligence" is an interesting tool in the discussion. Recently, the Portuguese Council of Ministers issued Resolution no. 132/2023, of 25 October, defining the ecological criteria applicable to certain kinds of contracts and products, goods and services concerning some administrative bodies, a Resolution which, nevertheless, is prone to criticism. May the shift of the European Union Public Procurement paradigm help implement Sustainable Public Procurement through mandatory requirements? Can the future Directive help economic operators align with contracting authorities to implement Sustainable Public Procurement? Might the obligation to include environmental factors help fulfil the Directive's due diligence obligations? And, lastly, has Portugal taken the right step with the issuance of Resolution no. 132/2023?

Still losing the race with technology? Understanding the scope of data controllers’ responsibility to implement data protection by design and by default

ABSTRACT Privacy by Design (PbD) is crucial for fundamental privacy protection. However, PbD remains a voluntary initiative without any means to ensure its effective implementation. Article 25 GDPR codifies PbD as a legal obligation requiring technologies processing personal data to follow Data Protection by Design and by Default (DPbDD). However, Article 25 is only binding on controllers which limits its scope. For instance, the design of technologies may not coincide with the entry of the controller into the digital value chain. This implies that the burden of implementing DPbDD lies on the users of technology and not on its designers, questioning the true extent of protection by design if stages like product development and innovation are excluded. This paper explores the legislative motivation behind the personal scope of Article 25. A holistic interpretation of Article 25 in light of other provisions of the GDPR shows a possibility, albeit not direct, to influence the design phase of technologies. However, it remains unclear whether this possibility ensures a co-division of responsibility. To address this, we propose examining corporate supply chain due diligence, specifically the due diligence obligations of mother companies for actions of their subsidiaries and business relationships.

Digital market and its adequacy of merger assessment in Indonesian business competition law

Purpose This study aims to analyze the development of digital market characteristics particularly focusing on how the strategic choices of platforms are not fully reflected in pricing. In addition, the implications for the development of theories of harm are investigated to explore the necessity of a relevant market definition in assessing infringement and evaluating the adequacy of Indonesian competition law. Design/methodology/approach This study is a legal analysis that uses statutory approaches, cases, comparative law and the development of theories of harm in digital mergers. The case approach is conducted by analyzing three cases decided by the Indonesia Business Competition Supervisory Commission. This approach provides insight into the response of Komisi Pengawas Persaingan Usaha concerning the merger and acquisition cases in the digital era as well as the provision of different analyses in conventional markets. However, competition can be potentially damaged in digital markets and a comparative law approach is taken by analyzing digital merger cases decided by authorities in other countries. Findings Results reveal that the digital market has created a “relevant market” that is challenging and blurred due to multi-sided network effects and consumer data usage characteristics. Platform-based enterprises’ prices fluctuate due to the digital market’s network effect and consumer data statistics. Smartphone prices depend on the number of apps and consumer data. Neoclassical theory focusing on product markets and location applied in Indonesia must be revised to establish a relevant digital economy market. To evaluate digital mergers, new harm theories are needed. The merger should also protect consumer data. Law Number 27 of 2022 on Personal Data Protection and Government Regulation on the Implementation of Electronic Systems and Transactions protects online consumers, a basic step in due diligence for digital mergers. The Indonesian Government should promptly strengthen the notion of “relevant markets” in the digital economy, which could lead to fair business competition violations like big data control. Notify partners or digital merger participants of the accessibility of sensitive data like transaction history and user location. Originality/value The development of digital market characteristics has implications for developing theories of harm in digital markets. Indonesian competition law needs to develop such theories of harm to analyze the potential for anticompetitive digital mergers in the digital economy era.

Prioritisation under Value Chain Due Diligence

Abstract This article analyses the mechanisms of prioritisation and hierarchisation of risk contained under influential soft law frameworks on value chain due diligence. It identifies the main stages of the due diligence process where prioritisation may be required and clarifies the criteria that may be used by corporations for prioritisation decisions. The article contributes to the development of the literature concerning prioritisation mechanisms under value chain due diligence norms, highlighting, from a compliance perspective, how corporations are expected to prioritise both their evaluations to identify and assess adverse impacts as well as their actions to address specific impacts identified and assessed. In doing so, it showcases the challenges present when comparing the significance of adverse impacts pertaining to different policy fields and their implications in a prioritisation context. It then compares the solutions found in these soft law frameworks concerning prioritisation to the ones contained in European laws and legislative proposals on the subject. The analysis reveals the different approaches used by legislators and reflects on their repercussions for prioritisation mechanisms, suggesting the reinforcement and clarification of prioritisation requirements in accordance with international frameworks of reference.

The Development of Online Teaching Materials for Indonesia Foreign Speaker Level 5

Indonesian Language Learning for Foreign Speakers (BIPA) is increasingly in demand, especially BIPA learning, which is carried out online. However, in online BIPA learning, there are still obstacles. The obstacle is the availability of BIPA online teaching materials. This research aims to produce BIPA online teaching materials that are feasible for BIPA 5 students. This study uses the ADDIE development model to Analyze, Design, Develop, Implement, and Evaluate. The resulting teaching materials are adapted to SKL BIPA 5 and consist of seven lessons that can be used for online BIPA learning. The seven units of material are natural disasters, historical places, Indonesian cuisine, short stories, let us discuss, creative poetry, and the hero. The presentation structure for each unit consists of learning objectives, pre-activity, material descriptions, practice questions, grammar notes, new vocabulary tables, and Indonesian insights. The material in each unit is designed to train the four language skills. Based on the due diligence on content, language, graphics and organization, presentation, and cultural elements in teaching materials, BIPA 5 online teaching materials are suitable for use by BIPA 5 students.

Blockchain for compliance: an information processing case study of mandatory supply chain transparency in conflict minerals sourcing

Purpose Firms are increasingly pressured to comply with mandatory supply chain transparency (SCT) regulations. Drawing on information processing theory (IPT), this study aims to show how blockchain technology can address information uncertainty and equivocality in assuring regulatory compliance in an interorganizational network (ION). Design/methodology/approach IPT is applied in a single case study of an ION in the mining industry that aimed to implement blockchain to address mandatory SCT regulations. The authors build on a rich proprietary data set consisting of interviews and substantial secondary material from actors along the supply chain. Findings The case shows that blockchain creates equality between actors, enables compliance and enhances efficiency in an ION, reducing information uncertainty and equivocality arising from conflict minerals regulation. The system promotes engagement and data sharing between parties while protecting commercial sensitive information. The lack of central authority prevents larger partners from taking control. The system provides mineral provenance and a regulation-compliant record. System cost analysis shows that the system is efficient as it is inexpensive relative to volumes and values of metals transacted. Issues were identified related to collecting richer human rights data for assurance and compliance with due diligence regulations. Originality/value The authors provide some of the first evidence in the operations and supply chain management literature of the specific architecture, costs and limitations of using blockchain for SCT. Using an IPT lens in an ION setting, the authors demonstrate how blockchain-based systems can address two key IPT challenges: environmental uncertainty and equivocality.

How information asymmetries exacerbate building defects risks for purchasers of Australian residential multi-owned properties

ABSTRACT Increasing urbanization is driving rapid growth in residential multi-owned properties (RMOPs) worldwide. Concerns about the quality of these buildings are also growing in many countries. Yet research into the quality of RMOPs (particularly apartments) remains scant and under-theorized. Addressing this knowledge gap, this paper reports the results of research which employed information asymmetry theory to provide new insights into the prevalence and risks of building defects in the Australian RMOP construction market. Using data about defects in 635 RMOPs built in Sydney between 2008 and 2017 and semi-structured interviews with sixty-six experienced practitioners, the results highlight the severity of the defects crisis. The research identified two types of information asymmetries which exacerbate the risk of buying into a defective building for RMOP customers: data fragmentation and data robustness. From a policy and practical perspective, this highlights the challenges faced by consumers in undertaking ‘due diligence’ and the need for reforms that address these information asymmetries.

Anticipation under the human right to science and under other social and cultural rights

ABSTRACT This article analyses how the right to science can benefit from the obligations and mechanisms related to anticipation of other, social and cultural rights. It considers how these obligations can be extended to the right to science and how they can benefit the right to science by ricochet. Hence, this article shows, on the one hand, the potential that the obligations of prevention, precaution and due diligence, when applied to, social and cultural rights, have to be extended into the context of the right to science. This analysis of obligations is followed by identifying mechanisms capable of addressing the anticipatory dimension required for implementing this right. It is therefore explored, on the other hand, how mechanisms such as indicators and HRIAs, considered useful in the framework of, social and cultural rights, can play a role in the implementation of the anticipatory aspects linked to the right to science. This analysis is based mainly on the interpretative function of quasi-judicial and jurisdictional human rights bodies.

Loopholes in the Indian Banking System concerning Non-Performing Assets (NPAs) – A Case Study of “Axis Bank and HDFC Bank”

Abstract -The paper presents a comparative case analysis of two leading banks, Axis Bank and HDFC Bank. The rising tide of Non-Performing Assets (NPAs) in the banking sector is a major threat to financial stability and economic progress. The case study uncovered severe deficiencies in risk management, credit evaluation, and regulatory compliance, which have resulted in a considerable accumulation of Non-Performing Assets. The banks' exposure to economically sensitive sectors amplifies the impact of downturns on asset quality. The limitations in credit risk assessment underline the necessity for increased due diligence. Regulatory frameworks, such as the Insolvency and Bankruptcy Code, and prompt corrective action have a significant impact on NPA responses. The findings highlight the complicated interplay between internal banking practices, regulatory frameworks, and economic conditions that affect a bank's financial performance. Addressing discovered weaknesses inside both these banks is important to the stability of India's financial system. The implications, as indicated by rising NPAs, are felt throughout the sector, jeopardizing overall resilience. Addressing these problems is crucial for reducing systemic risks, preventing a credit crisis, and rebuilding trust in the financial industry. A better banking system is critical for India's financial stability, economic growth, and stakeholder trust. As major private sector players, Axis Bank and HDFC Bank’s successful remediation set a precedent, emphasizing the need for excellent risk management, regulatory compliance, and strategic adaptation. Key Words: Axis Bank, HDFC Bank, Non-Performing Assets, Risk Management, Regulatory Compliance, Financial Stability, Economic Impact

Due Diligence

ABSTRACTWe propose a model of due diligence and analyze its effect on prices, payoffs, and deal completion. In our model, if the seller accepts an offer, the winning bidder (or “acquirer”) can gather information and chooses when to complete the transaction. In equilibrium, the acquirer engages in “too much” due diligence. Our quantitative results suggest that the magnitude of the distortion is economically significant. Nevertheless, allowing for due diligence can improve both total surplus and the seller's payoff compared to a setting without due diligence. We use our framework to explore the timing of due diligence, bidder heterogeneity, and breakup fees.

Mapping out due diligence in regional human rights law: Comparing case law of the European Court of Human Rights and the Inter-American Court of Human Rights

Abstract In international human rights law, the notion of due diligence concerns a qualifier of behaviour to realize human rights protection, including the protection against non-state actor interferences. However, the question remains what due diligence obligations of states in the context of non-state actor interferences exactly entail in international human rights law. The present article aims to address this matter by comparing case law of the European Court of Human Rights (ECtHR) with that of the Inter-American Court of Human Rights (IACtHR). Using a working model of due diligence that has been introduced in recent scholarly work, this article further explores this model and attempts to give further meaning to its two paradigms: ‘regulation’ and ‘risk management’. In that way, it maps out the relevant elements of this foundational concept that lies at the heart of human rights protection.

PENGEMBANGAN MEDIA PEMBELAJARAN AUDIO VISUAL MENGGUNAKAN APLIKASI CANVA PADA PEMBELAJARAN IPS BAGI SISWA SDN CIRACAS 11 PAGI

The background of the research is that there are still many students who do not understand the material conveyed by the teacher, this is because the teacher does not use the media as a support in the learning process in social studies subject to the cultural diversity of my nation. The aim of the study was to analyze the due diligence and student responses to audio-visual-based learning media using the Canva application on the cultural diversity of my people. The research was conducted at SDN Ciracas 11 AM class IV as many as 33 students. The method used is research and development (Research and Development) with a 4D model. The data collection method using a questionnaire was validated by media experts and material experts and in the form of questions directed to students as subjects in this study. The results of the feasibility test were validated by two validators, namely the media validator obtained a percentage value of 96% getting very feasible criteria then the material validator obtained a percentage value of 86% getting very feasible criteria, while in student responses obtained a percentage of 92% very feasible criteria . Based on the results of the assessment, it can be concluded that audio-visual learning media using the Canva application which is packaged into learning videos on the cultural diversity of my people for class IV at SDN Ciracas 11 is very feasible to use.

Unmasking company liability for corruption by associated persons

Purpose The Malaysian Anti-Corruption Commission Act 2009 (MACC Act) has introduced Section 17 A, which holds companies and their management accountable for bribery committed by their Associated Persons in the interest of the company. This study aims to explore the evolving concept of Associated Persons and corporate liability within this legal framework. It delves into three primary legal models of Associated Persons, particularly focusing on corrupt cases falling under Sections 17 A (1), 17 A (6) and 17 A (7) of the MACC Act. The study also investigates the extent of Associated Persons’ involvement in these cases that eventually led to company liability. Design/methodology/approach The study deployed thematic and comparative analyses to assess the legal framework and highlight the significance of Section 17 A of the MACC Act. Findings The study disclosed that, despite having corruption policies, there is still a possibility for Associated Persons to engage in corrupt activities. To ensure long-term business sustainability, it is crucial to implement effective mechanisms and a strong compliance culture. Originality/value This study suggests implementing a due diligence checklist and conducting risk assessments for companies as measures against corruption caused by Associated Persons. Corporate entities and legal professionals may benefit from the reported findings to better comprehend the corruption offences outlined in Section 17 A of the MACC Act.

Exploratory Analysis of Regulation of Hedge Fund in India

This research paper provides critical insights of hedge funds, examining their positive and negative impacts on investment vehicles. Hedge funds cover a broad range of investment Philosophies and Risk tolerance strategies to grow the invested funds of their investors. Hedge funds are known for their diverse investment strategies, offering potential diversification benefits and the ability to generate alpha in various market conditions. Their strong risk management systems and potential for liquidity make them an attractive option for certain investors. However, this research also underscores both positives and negatives with hedge funds, including high fees, complexity, and inaccessibility to most retail investors. Regulatory risks and lack of transparency pose additional challenges, while performance variability and the risk of significant losses require careful consideration. The paper explores the intricate nature of hedge funds, addressing the need for due diligence and professional guidance when evaluating investment opportunities. By providing a comprehensive assessment of hedge funds, this research paper aims to inform investors, financial professionals, and policymakers about the advantages and drawbacks of these investment vehicles, facilitating more informed decision-making within the dynamic landscape of alternative investments. This paper will also have a comparative analysis of other countries where hedge funds are regulated and how they are regulating hedge funds and how they are utilizing hedge funds to grow their GDP.

The Nexus between Supplier Selection Practices and Procurement Function Performance: A Kenyan Public Universities Perspective

Purpose: This study aimed to unveil how supplier assessment and governance influenced procurement function performance.
 Methodology: The study employed a post-positivist research philosophy and a causal-comparative design. The study used multi-stage sampling to arrive at the sample of respondents of 93 procurement officers. Quantitative data was collected through self-designed structured questionnaires and analyzed using Statistical Packages for Social Sciences (SPSS version 27). Demographically, the study included predominantly experienced, educated male and female professionals.
 Findings: The findings of the study revealed that supplier selection significantly and positively impacted procurement function performance. Specifically, supplier assessment exhibited a noteworthy positive effect on procurement function performance (β = .517, p < .001), underlining the critical role of due diligence, evaluations, and appraisals among suppliers. Similarly, supplier governance demonstrated a substantial positive effect on procurement function performance (β = .310, p = .001), highlighting the significant roles of supplier selection transparency and conflict resolution mechanisms in procurement processes.
 Unique Contribution to Theory, Practice and Policy: This study unveiled how supplier assessment and governance influenced procurement function performance anchored in the Resource Dependence Theory (RDT), The study's results confirmed that robust supplier selection practices, grounded in supplier assessment and governance, significantly improved procurement function performance in Kenyan public universities. Strengthening supplier assessment protocols and governance mechanisms emerged as imperative for optimizing outcomes in procurement functions.

The due diligence obligations of the Digital Services Act: a new take on tackling cyber-violence in the EU?

ABSTRACT Cyber-violence is an entrenched phenomenon in the context of information society services, as the operational and business model of online platforms can pose severe harms and threats to online users. The Digital Services Act has come into force as of 19 October 2022, with the purpose of facing the risks and challenges for individual recipients of information society services. While ambitious in its aim to create the conditions for a ‘safe, predictable, and trustworthy online environment’, the Digital Services Act introduced several – yet still difficult to outline – due diligence obligations on very large online platforms (‘VLOPs’). The purpose of this article is to investigate said new due diligence obligations of the Digital Services Act Regulation, in the attempt to assess whether or not these might benefit the users most affected and/or exposed to cyber-violence within a long-term policy strategy.

Aircraft vulnerability to politically motivated Radio Frequency Interference (RFI) in Eastern Europe

Countries in Europe have experienced radio frequency interference from Russian electronic warfare units, affecting navigation systems without discrimination. Interference has been identified as coming from the Russian mainland, Kaliningrad, and in the areas where it is engaged in conflicts abroad, creating serious hazards for aircraft. Previous research has identified the technical vulnerabilities to aviation from radio frequency interference, but it has yet to be contextualised in light of the ongoing geopolitical tensions. Using literature review analysis, the aim of the article is to place the jamming and spoofing threat in the context of ongoing political tensions between Russia and the region and to establish worse-case scenarios based on the former’s motives. Focusing on the threats to aircraft, it finds that the likely motivations are to (1) complement political narratives of Western aggression; (2) to deny service for intimidation, harassment, economic loss, and to portray a dominant Russian cyber influence; and (3) to use spoofing to enable hostage diplomacy via the seizure of people and assets. It argues that reporting mechanisms for aviation risks assumes geographical staticism, which does not correspond adequately to the threat. It also creates arbitrary “predictability” in otherwise unpredictable environments, which could ultimately affect vigilance and due diligence in the areas not considered problematic.