What Is Your Agent Story?

Thursday, September 28, 2017
The use of agents is normal practice in a range of industries, and very often crucial in order to succeed as a company, for example when entering into new markets or areas /regions. However, as most companies are aware of, engaging agents can also expose companies to risks and potential consequences. Examples might include entering into contracts or obtaining licenses in a way which later harms your company´s reputation, leads to loss of key employees, damages your business or puts your company under criminal investigation. In view of the above, it is worth asking the relevant questions: Are you on top of your ‘agent risk’? How should you deal with this issue to best protect your business?

Author: Partner / Lawyer Nicolai Skridshol and Special Advisor Lene Eia Bollestad

Be Aware Of Your Agent Risk

Being on top of your agent risk requires knowledge and control over the relevant facts. If your company’s management was involved in the process of onboarding and following up the agent, this work should be fairly straightforward. The relevant question is then whether your employees and/or agent have been involved in unethical and/or illegal act and, if so, what these unethical/illegal acts consist of. For investors and companies that have “inherited” an agent relationship through M&As or corporate restructuring, the knowledge e.g. as to how important contracts were entered into or how licenses were obtained, should (optimally) be gained in the legal and/or compliance due diligence phase or, failing this, as soon as possible after closing. However, sometimes companies struggle to gather such information or fail to acknowledge the high risk an agent has exposed them to – especially when they inherent the actions of previous management, and fail to dig deep enough into the facts regarding the agent in their due diligence processes.

We Recommend Documenting Your “Agent Story”

Regardless of your perceived situation – whether that is having sufficient knowledge and control over your agent risk or not – we recommend documenting your “agent story”. Firstly; this will educate and align the knowledge and understanding of the company´s use of agents for relevant people within the company. Secondly; should your agent or your use of agents be questioned, whether by a potential investor, a new owner, the media or even by ØKOKRIM, you will have all relevant facts and assessments documented. This might be especially helpful when the suspicions and questions relate to situations from many years back and with different employees involved. If you are suspicious of your agent or your agent´s actions, documenting your agent story becomes even more important as your perceived exposure to agent risk exposure is higher.

This work does not have to be comprehensive. Writing an internal memo that includes a few topics and areas with regards to your use of agents will for most companies often be sufficient. We believe that such a memo should at least include the most important elements of the story to ensure an internal common understanding; including:

  • The agent engagement process
  • The agent’s network
  • Potential license/contract awarding process
  • Risk assessment

How To Find Relevant Information To Document Your “Agent Story”?

Internal documents such as contracts, emails, financial books & records are often relevant sources of information for understanding the facts regarding the work and cost of the agent (both for historical and future use). Furthermore, we experience that gathering of additional information through interviews/meetings with internal employees, (potential) joint venture partners and/or the agent themselves will often provide relevant and valuable information for the company.

Many companies choose to use external experts, e.g. lawyers and/or external advisors, to assist in the process of finding information and documenting relevant facts, and we note that our work together with relevant people within companies generally uncovers valuable information for further strategic business decisions and investments, on e.g. legal, financial and reputational aspects.

Conclusion

The requirements and expectations from stakeholders, such as investors, government and the media, with regards to how companies are run, are increasing steadily. We know that many companies are very professional and are doing great work to manage their use of agents, and we recommend others to do the same.

In conclusion, we want to wish you good luck in managing your agent risk exposure, documenting your agent story and protecting your business. We appreciate the opportunity we have had in contributing to companies’ successful journeys, and we look forward to taking part in new, good stories. Good Luck!


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