November 2014

The Enhanced Due Diligence Index (DDI) Minimizing the risk of doing business with a Russian ‘shell’ company

In Russia, the likelihood of coming across a ‘shell’ or untrustworthy company is very high. These shell companies are a threat to legitimate businesses through fraud and default. More seriously, doing business with these companies can result in sanctions from Russian tax authorities.

D&B and its Worldwide Network partner Interfax Group first introduced the Due Diligence Index in 2011 to provide greater transparency on Russian businesses. The DDI is specifically tailored to the Russian commercial and regulatory context. The enhanced DDI, now available on 3.9 million businesses, provides greater precision in assessing the likelihood that a business was not created for legal purposes or exists as a ‘transactional entity’ with no significant assets or operations. The insight the DDI provides will allow D&B’s customers to minimize their risk when dealing with Russian entities.

Up to 20 factors combined into a single index to assess risk

The predictive characteristics of the enhanced DDI have been enhanced and the statistical error level has been reduced by 3% to 5%. The model now incorporates anywhere from four to 20 factors, depending on whether company financials are available. Among the factors considered: whether a director or address is associated with multiple businesses, material facts disclosure, industry segment, trade activities, and region (e.g. Dagestan). Region in particular is a strong predictor.

The DDI is offered through the D&B Business Information Report and Comprehensive Report. It can also be delivered in batch upon request. It is available on 3,938,085 businesses in Russia (82% of the active universe). The exceptions are banks and credit bureaus to which oversight bodies use license rules, not-for-profit organizations, and state institutions.

At the Glance - the Due Diligence Index

The Due Diligence Index is calculated using statistical methods to assign each business entity a score representing the likelihood that the entity was created (or exists) to carry out just one transaction and has no real assets or operations. The score takes on values 0 - 99 which represent the probability of being a 'shell' company. The higher the Index value, the more likely the entity is a 'shell' company.

Distribution of the Enhanced DDI across Russian Business Universe


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