Coming in from the cold

Until two months ago, when it was revealed as the provider of the surveillance which helped to save the Co-operative Wholesale Society (CWS) from the unwanted attentions of a City whizz-kid, Control Risks was one of those rather shadowy, Le Carre-esque companies known by many but mentioned by few.

The 3,000 clients for which it claims to have worked in 100 countries during more than 20 years of existence seldom, if ever, mentioned it, and it most certainly would never have mentioned any of them by name, or even in vague generalities. Any such utterance would have been terminated with extreme prejudice; so too, apparently, would all but the driest mention of itself in its explanatory literature or factual reports.

Only bare details have been published elsewhere: it was founded in 1975 by an ex-SAS officer, then run by another, Arish Turle, who later joined and became senior UK managing director of Kroll, the US-owned company often seen as the "Hertz" to Control Risks' "Avis"; it embarked - presumably to challenge Kroll - a couple of years ago on a "walk down lovers' lane with a view to an eventual joint venture" with O'Reilly Gurka, an investigation company in Hong Kong; it has 200 employees, 100 of them outside the UK, in a dozen other offices worldwide; the latest available figure for its group turnover, to March 1996, was $15.4m, up more than $2m from the year before.

Comments made by the company in response to client indiscretion or excitements beyond its control - like the brokering of a ransom deal by a third party which reportedly undermined its efforts to secure the release last year of a German hostage kidnapped by guerrillas in Colombia, perhaps its busiest market - have verged on the monosyllabic. The contrast with Kroll - which was said to be high-profile and on occasions criticised for talking too much, at least until its recent takeover by the American credit information company, Equifax - could scarcely have been more marked.

Now, though, at its HQ on the second floor of one of those anonymous 19th-century red-brick shop-and-office buildings just down Victoria Street from the Palace of Westminster, there seem to be signs that Control Risks' self-imposed gag may be starting to loosen.

Shortly after the company's decisive role in the CWS defence was exposed, an intermediary let it be known to the Independent on Sunday that the company might be willing to subject itself to a bit further judicious publicity. However, to the suggestion of a profile of Nigel Churton, the former army officer who is the company's managing director, the answer was that this would not reflect the company's collegiate style of management.

What about a profile of the company instead? After a preliminary negotiation in one of the rooms it leases across the street in the BAT building, Richard Fenning, the company's business development manager, took the momentous step of agreeing to arrange a suitably collegiate interview with three of its senior specialists. The subjects to be discussed were due diligence and political risk assessment, two of Control Risks' most commercially- significant functions, and their critical overlap in two of its most rapidly- expanding and sensitive markets, China and Russia - where in the past year it has carried out over 100 separate due diligence investigations for more than 50 mainly multi-national companies thinking of doing business there.

But ground rules are there to be stretched, and, inevitably, the subject of CWS was raised. In the messy game of contested takeovers, catching a senior member of the home team in the act of passing confidential material to the opposition was a rare coup indeed.

"The CWS case has brought us a lot of new business," admitted Mark Lethbridge, who joined Control Risks earlier this year to become, according to his card, "Director of Business Development, International Investigations".

"It was interesting how very little criticism of the surveillance there was. It was accepted as one of the necessary expedients in that kind of situation and in fairness, yes, the mere fact that it happened has led to a much greater awareness of one small part of what we do. But it was a small part of the preparation for the CWS defence, and it has never been very central to our work in contested takeovers. And it'll become less so in future, because the state of the art moves on."

In London, the company has four main divisions: information services - which cover 75 countries in-depth, produce risk assessments for more than 200, and have 600 regular subscribers; investigation; security risk management; and response - handling cases which involve matters like kidnap and ransom (K&R) and extortion.

Whereas the EIU, and businesses like Oxford Analytica, compete directly on the information front, and names like Kroll, Bishops, Network Security and Carratu compete in the area of investigation, none of them, Mr Lethbridge claimed, could provide the same range or depth of service, in what he described as "a very interesting one-stop shop". "You could argue," he added, "that we've been hiding our light under a bushel for too long."

Not surprisingly, in an industry not known for effusions of brotherly love, there are those who argue that Control Risks is not always as good as it claims to be, and in certain parts of the globe, like the former Soviet Union, it is still not as on the ball as rivals Kroll. Such critiques, though, may be based on differing premises.

"We're not spying on people's boy- or girl-friends or involved in things like that," said Toby Latta, a Russian speaker who, from 1989 until he joined Control Risks in London as "Regional Consultant, Former Soviet Union", lived in Moscow, working as a journalist and researching a book on the "mafia". "We're at the upper end, providing clients with sophisticated strategic investment advice on the risks they're going to encounter."

The company's other six Russia specialists - four of them in its Moscow office - include an ex-army officer advising on security, someone who spent three years in Siberia administering Japanese investments, a Dutch ex-policeman who worked in the Netherlands' equivalent of the UK's National Criminal Intelligence Service, an American ex-journalist and an ex-academic Sovietologist-cum-historian. "All these things," he claimed, "come together to enable us to provide unique advice."

At present, he said, they were working for a Western corporate client which had bought 25 per cent of a chemical enterprise in Russia, and wanted to know whether, with two other principal shareholders in the frame, one a vehicle for "Soviet era" management, whether it could feasibly assume control.

"Our clients don't know enough about the enterprise, or the other shareholders, so they're trying to work out if they can go ahead, or if local or political opposition would make this unviable. It's a sensitive business with possible strategic implications, so they want to find out what the reaction's going to be. If they don't, they won't go ahead, which could mean wasting two years' of expensive management time, let alone air tickets and hotel bills.

"In government and official circles in Russia, corruption is endemic. A Western company taking control of a company there may find the authorities suddenly sweeping in to demand huge [amounts] of back tax for which they're not liable. This has happened to a number of our clients. Do they pay, or get involved in negotiations with the government which can go on and on?

"Each situation is different; there are no blueprints. We look at who's making the demand, how powerful he is, work out his relative strengths and weaknesses, but never advise the client to pay up. With criminal extortion, the same goes. We look for the pressure points."

Since the early 1990s, he said, he had noticed "a great change" in the attitude of Westerners doing business in Russia. Fewer of them have any qualms in coming to people like us, although the number who still say they'll "trust in their gut feeling" is distressing. "Their naivete is staggering, and they have no idea about the networks of power they need to understand, particularly if they're moving out of Moscow and St Petersburg into the regions, where the blurring of the boundaries between business and politics and organised crime can be extraordinary."

While the difficulties facing Westerners in Russia are such that the sum of $5bn actually invested there since1989 has been a fraction of the sum involved in trade, the emphasis in China has been more heavily on investment - with more than $40bn flooding in from foreign countries in 1996 alone.

There, according to Jake Stratton, who studied Mandarin at Cambridge University and, having spent much of the past five years in China, is the senior Asia analyst for Control Risks' information services, the "underbrush" can be rather less obvious, but just as treacherous. "There's a massive anti-corruption drive going on, and at the very fewest, several hundred officials have been executed. It's therefore extremely dangerous for them to demand money up front.

"With foreign companies, the problem is less of contending with bribery than with personal connections. Several of the high-ranking officials in the Communist party have tremendous business empires through their families, and anyone with a bit of political influence who is connected with them can have tremendous commercial clout. A foreign company which stumbled into one of these networks of power without realising it would find any dispute it had with a Chinese business partner very hard to resolve."

For much the same reason, the US government has been persistently frustrated in its efforts to persuade China to clamp down on infringements of intellectual copyright by the fact that, behind numerous corporate veils, some of the biggest pirate video and compact disc factories are owned by the People's Liberation Army.

In such circumstances, due diligence does not so much overlap as become synonymous with political risk analysis.

"Foreign companies rarely come into contact with local gangs," says Stratton, "but they can find themselves being subjected by officials to arbitrary charges or taxes whose legality is hard to prove. In Canton, 228 of these have been identified, so it's easy to see where corruption could start creeping in."

Whereas many foreign companies in the former Soviet Union remain wary of using senior indigenous staff in negotiations or business development, he said, "in China, more and more now employ bright or well-connected Chinese for this, instead of expatriates". One very large British company even employs the son of the Premier, Li Peng.

Because investigative due diligence cases in China have, until now, been far fewer than in Russia, Control Risks has no Peking office, but relies on a network of contacts. And the operation, apart from the support of its peripheral offices in Japan and the Philippines, remains a strategic partnership with O'Reilly Gurka.

If the company has done any analysis of the risks posed to its own operations in the region by the British departure less than three weeks hence, none of the three was saying, and none seemed other than optimistic. Neither were they forthcoming about any extra problems which British companies might face as the result of the Labour government's policies on issues like human rights or landmines - many of which are of Russian and Chinese manufacture.

"On that front, I suspect," said Mr Lethbridge, "there will be very little that's new to us." In China and Russia, he was confident, the company's business would continue to grow.

The commercial logic, he said, seemed irrefutable. "It's very much cheaper for companies going into these markets to use us to fit our piece into the jigsaw puzzle than for them to rely on investment bankers and the bigger firms of accountants and lawyers."