Letter from our CEO & Executive Chairman

This was another strong financial year for The Red Flag Group®

We made significant improvements financially with revenue growth and positive cashflow from our operations, while further investing in our products and more overseas offices. Our investments in new products and research and development continue, both to commercialise new products in the future and develop internal solutions to allow us to become more efficient and productive. Again, this was all done with a long-term vision of sustainable and repeatable growth and profitability, without the need to produce short-term gains for investors that don’t align with our vision or the needs of our customers.
 
As in previous years, my notes for the annual report are always couched in the terms that we are a private company and owned by our management and, as such, I won’t disclose a great deal of information about our financials except as necessary to assure our stakeholders that we are a going concern and have more than sufficient cash to fund our operations. We aren’t aiming to be the biggest firm in the world or necessarily the most profitable; we just want to run a great business that adds value for our clients, contributes positively to global compliance initiatives of reducing corporate bad behaviour (that impacts the human race everyday) and hopefully makes money in the process to support the development of our employees, their families, our partners and our shareholders.

Likewise, we won’t give enormous detail about our strategy, except to the extent that it is already publicly available and it is essential for clients and stakeholders to see whether our strategy is aligned to theirs. Despite that, we believe that it is important to outline our general approach to how we run our business. Clients, partners, employees and other stakeholders can see our performance and judge our development for themselves. We believe in corporate transparency and adopt that approach internally.

This year was a year of change – much like every year in our 13-year history. Following are notes on some of those key changes and developments. 

We are a data-driven firm, not a consulting business

While it has been the case for many years, we now openly acknowledge that we are not a consulting firm. Consulting and advisory work now represent less than two percent of our business. Our trade is in the highly-enriched data business, where we provide data to clients about their engagements with companies and people in more than 194 countries. We also provide technology solutions to help companies onboard these counterparties. This acknowledgment might be new to some clients, but it is significant  because, as the industry (and our firm) moves forward, it is this data that allows us to provide the best solutions and offer rich, risk-rated and monitored information and intelligence on companies and people.

We don’t do third party due diligence

It is a common misconception across the industry that we do third party due diligence for our clients. Clients do third party due diligence; we don’t. What we do is provide clients with the data and technology platforms for them to conduct their ‘third party due diligence’, ‘second party due diligence’ and ‘first party due diligence’. The concept of ‘third parties’ relates back to the 1970s when due diligence on sales agents operated as ‘third party’ due diligence because of the agency-type relationships that sales agents operated under. Today, these words are not that important – it is all about knowing who you are doing business with at all levels and types within the company.

Recognition that compliance is all about good business

Since its inception, the firm’s philosophy has been to demonstrate to clients that compliance is a part of doing business. It doesn’t make sense to separate the two.

We reflected this philosophy by changing our tagline to focus less on compliance and more on looking at the way that compliance gives certainty to a business and allows that business to operate within a playing field that is known and documented. Our focus isn’t on having clients comply with a law by doing due diligence, but more about giving them the information, intelligence, analysis and advice that they need to make Better Decisions™ about engaging someone in their business. We want to help clients ensure that the people that they engage, who will ultimately be a reflection of themselves, are the right companies and people. Our focus is simple: we get you the information you need to ensure you make Better Decisions™ about the people you engage. We do this through a bunch of systems, tools, technologies, databases and research, but at the end of the day it is all aimed at helping you grow your business, not defending an allegation of misconduct by having ‘adequate procedures’. Our philosophy reflects that compliance is all about business, not about the law.

Strategic vision of the firm

This year we implemented a corporate development team to help us grow our business both directly and through partners. We identified several areas where we want to invest and grow and have engaged our Strategy and Corporate Development team to coach the business leaders on how to achieve our strategic vision. The Strategy and Corporate Development team is key to identifying new partnership opportunities and it managed our acquisition of ETHIC Intelligence®, a Paris-based certification agency in the ISO 37001 and ISO 19600 space. This is an exciting area for the firm as there is more to expect in 2019/20 with further announcements and significant partnerships that align us with known companies that complement our solutions and will significantly add value for our clients.

Acquisition of ETHIC Intelligence® adds certification capability to the group 

We have typically been a build verses buy kind of company, but we felt that the ETHIC Intelligence® business was so strong that acquiring it was too good of an opportunity to pass up.

Compliance is one of the only functions in the business world that doesn’t have a common standard. We believe that this will change. The future will have companies with strong compliance programmes certifying those programmes. That’s why we acquired the leading company in this space to continue certifying companies against ISO 37001 and other standards as we grow that business. We believe that certification is proof of a great compliance programme, so we have proudly developed the tagline of Certified for Compliance®.

Our Customer Success team continues to grow 

Globally, we have continued to grow our sales, marketing and customer success teams globally by adding additional resources in China, France, Spain, Germany, Poland and several cities across the United States. Having a coverage model is important to support our clients and to develop our business into new markets. We also implemented new management layers on our business development side and new leadership in our global sales team. In our firm, our global sales, marketing and customer success teams need to be more than just product experts – they need to be customer advocates and content experts. We are continually training our teams to add the value that clients should receive.

New offices expand our business into new markets 

Our new offices this year included Paris and Madrid. These added to our coverage across Europe, where we continue to expand to support our growing client base. It is clear that compliance and understanding the needs of due diligence are expanding globally and the demands of clients for information and intelligence to help them make Better Decisions™ are paramount.

New products launched in 2018 

Years ago we predicted the growth in supplier onboarding and how this was different to the classic FCPA-driven distributor onboarding, and we developed a new software platform specifically for this purpose. We are pleased to say that 2018 delivered our first group of clients come to the platform, led by one-of-the largest medical-device companies in Europe and one of the world’s largest global car companies. The Supplier Integrity® platform is proving to be a very useful tool for clients to help onboard their more complex suppliers, given the number of risk areas involved and the steps needed to adequately review them. The platform and our managed services offerings (where we actually do the admin and management of onboarding for clients) have worked very well together to add significant value for clients.

We also witnessed the launch and successful sale of our hotline product, IntegraCall®. Breaking into a new market like the hotline and whistleblower space was always going to be a challenge; however, the team has built and deployed a very cool AI-driven application and case management system supported by IBM Watson technology. The launch of the first version is proving to be successful and we expect that our updated releases (due in 2019) will make this a game changer in the compliance space, especially for those mid-market companies that want a simple and effective tool that is not expensive and can be set up in minutes. The simplicity of IntegraCall® is amazing and we look to disrupt this established market this year.
 
Looking forward to 2019/20

We are well along our path of introducing significant changes to our business in 2019/20 with the implementation of new products aimed at the due diligence market. We are already in the alpha release phase for new products expected to launch in the second half of 2019.

One of the big changes in 2019 is the new ways to access the body of data that we have built up over 13 years of research. Our firm has invested hundreds of thousands of research hours and we have built up a substantial bank of intellectual property on private companies in the emerging markets. Every single one of these companies and people are or have been suppliers or partners of the largest companies in the world. We are working on several ways to make this data available to clients on an immediate-access basis through our platforms and through others not managed by the firm.

Our focus remains on producing the highest quality products in every single part of our business. This focus on quality starts at the accuracy and depth of our research led due diligence products and the development of our databases, and continues through to the production of technology platforms that are bug-free and secure. The drive for quality is embedded in everything we do and we strive to always exceed our own high expectations.
 
This is an extract from The Red Flag Group Annual Report 2018/19. To read the full report please click here.
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