DIAGNOSING AND MITIGATING REPUTATIONAL RISK

Before investing in a private equity firm, a concern prevalent in most investor's minds relates to the issues of reputation risk. This sometimes amorphous operational risk category can be difficult to define. Some investors may focus on this category solely from a more hard-line perspective of inquiring whether a private equity manager has ever been arrested for financial crime. Others may broaden the scope of such inquiries to determine if a manager has even been sued or has any negative media relating to them. In many instances investors will engage third-party background investigation firms to perform such reviews. Some key considerations and questions investors may want to consider regarding background investigations and reputation ris....