Due Diligence and the Professional

1. Due Diligence and the Professional A Presentation to the BCIA by Linda Michaluk, RPBio, Executive Director, College of Applied Biology, and Association of Professional Biologists November 1, 2008

2. Characteristics of a Self-Governing Profession • A practice or undertaking that can be specifically defined and that requires a significant amount of specialized study and training; substantial part of the work product is mental not manual • Generally defined by provincial legislation where the need to protect the public from the improper performance of a service outweighs the need to provide a competitive marketplace: commitment to duty (ethical conduct) over self-interest or personal gain • Has a set of standards governing both the conduct and competence of members

3. A Professional … • Is accountable to a legislated self-regulating body • Exercises judgement and discretion • Undertakes self assessment • Is committed to engaging in life long learning • Knows their intellectual limits • Must be trust worthy • Balances the duty to their clients with their duty to society • Does not offer warranties or guaranties on work or outcomes • Has certain entitlements

4. Challenges for the Professional • Maintaining public trust • Misperception of being elitist • Ability to handle increasing public expectations • Addressing multiple constituents/stakeholders • Increasing specialization and complexity • Relying on work prepared by others • Maintaining independence – in fact and perception

5. Due Diligence – in what context? • Term introduced in the 1930’s in American Securities laws, although sentiment has been with us as long as we have had transactions between individuals • Used in three main ways: • An investigation or audit of a potential investment to confirm material facts in regards to a sale • A legal defence asserting that all reasonable precautions to prevent a harm from occurring were taken • Professional conduct.

6. Accountability, Responsibility and Liability • Accountability – an obligation owed – cannot be delegated (professionals are answerable for their actions) – not lessened by due diligence • Responsibility – the authority over something – can be delegated – not lessened by due diligence • Liability – a consequence of both accountability and responsibility – can be lessened by due diligence

7. Professional Practice Elements • Professionals maintain competence • Professionals are independent • Professionals act with integrity, both in the professional and personal lives • Professionals exercise due diligence

8. Intellectual Honesty • Honesty in the acquisition, analysis and transmission of ideas • Identify the source of information • Examine conclusions and how they were arrived at to ensure sound reasoning as opposed to confirmation bias • Communicate results fairly, completely and in a manner understandable to the reader/client

9. Due Diligence – what it is • Diligence – careful and persistent application or effort* • Due – proper, sufficient or adequate* * The Canadian Oxford Paperback Dictionary, 2000

10. One due diligence definition for professionals: Due Diligence is exercising the care a reasonableprofessional under the same circumstances would use – reasonable but not necessarily exhaustive efforts – to achieve a desired outcome or prevent an undesired one. Only a professional with the requisite expertise who acts in a reasonable and prudent manner will meet the test.

11. Requisite Expertise = knowledge, skills and experience appropriate to the task • The minimum knowledge and skills required to qualify for admission to the profession may not be enough • What constitutes the requisite expertise changes over time; a professional must ensure he or she has up-to-date knowledge about problems and solutions, and the skills needed to apply this knowledge • If you don’t have the requisite expertise, bring in an expert who does From R Reader presentation, May 6, 2004

12. To ensure due diligence, a professional must satisfy that: • All legal requirements are met • Background information is collected and incorporated • Appropriate experts are consulted with or retained if and as required • Sufficient data are collected to ensure proper assessment of risks and outcomes • Appropriate documents, files and filing systems are kept and maintained in a manner suitable to the documents and the situation

13. How much is enough? • The standard for due diligence is one of reason, and not perfection. • The level of effort expended, or diligence due a situation, should be relative to the degree of risk and the potential for harm Due Diligence Risk Potential for Harm

14. How do I do this? • Use checklists to ensure that the tasks are completed properly • Seek out standard operating procedures or other means to show that relevant steps or considerations have not been missed • Document actions and maintain files so your efforts can be demonstrated to those who question

15. Due Diligence Check List Considerations • I stay within my area of expertise • I identify and consult with specialists • I meet all legal requirements • I access and apply all relevant data/ information • I follow, document and reference the appropriate standards of practice, and document why they were not followed • I reference, explain and justify any new or unusual methods • I state conclusions in a clear and understandable manner so they are understood by the client, regulators and reviewers • I ensure the level of effort is appropriate to the perceived risks • I identify and address uncertainties or differences of professional opinion

16. Scenario 1 It has been a tough year and contracts have been a little on the light side. You answer the phone one day and the proponent of one of the biggest projects in the area asks you to take on a contract. You start to breath a little easier. The project is within your area of practice although there are habitat elements that will require you to bring on additional expertise. The client, however, has already recognized this and lets you know that his wife’s brother is a Registered Professional Biologist, and to help both project budget and family relations, requests that you use him. How do you handle this? What do you do?

17. Scenario 2 • You are contacted by a new developer in town who needs some work done. You look at the project scope as identified by the prospective client and you prepare a budget. After the guy stops freaking out, he tells you that there is only so much money available and tells you how much he has to spend. • What do you do?

18. Scenario 3 You have just been hired in a full time staff position as a PAg with a firm in a town to which you have recently moved. After a couple of days, your boss (not a registered professional) comes to you and gives you your first assignment. Your predecessor was involved in a job for the firm, and all that is left to complete is to file the submission with government. It is therefore presented to you for your professional signature. When you advise your boss that it is going to take you some time to become familiar with the file, your boss reminds you of the following:

19. Scenario 3 (con’t) • Your predecessor was a PAg, and expressed no concerns with how the project was going • The subs on the project have worked for the company before and so far as your boss is aware are well thought of • The company is going through a bit of a slump and needs to get this project off the desk and out the door so it can get paid • The company prides itself on the trust and teamwork attitude that exists throughout the firm, and as this is your first time at bat...

20. Scenario 3 (con’t) • What do you do?

21. Summary In order to demonstrate due diligence, a professional should be able to provide evidence of the following: • Knowledge of duties under the current acts, regulations and codes. • Adequate training to undertake the task. • Professional work practices not compromised by schedule or budget constraints. • Identification of potential problem areas based on available information and data. • Use of existing procedures to mitigate problems where practicable. • Necessary caveats or disclaimers. • Sufficient documentation.

22. Ethics – from paper to practice • A little knowledge is a dangerous thing • don’t take on work you are not qualified to do • Keep on top of what’s happening in your field • Treat others the way you would like to be treated • When you disagree with other professionals, talk to them • let people know why you disagree with another professional • Help people to understand your advice and its implications • Base your decisions on the science (not the other way around) • Don’t break the law • Tell the truth – all the truth, all the time • the truth about where and how you got your data, its limitations, your abilities, what you know and what you don’t; the constraints and the prejudices • Filing is everything • track your decisions and your documents; keep confidential things confidential • Respect yourself and your profession • Uphold the dignity and integrity of your profession

23. Ask yourself... • What would happen if everyone did it this way? • How would you view the effort if you were called to testify in court?

24. Materials in this presentation have been drawn from a number of sources including: College of Applied Biology Association of Professional Biologists Association of BC Forest Professionals Association of Professional Engineers and Geoscientists of BC Association of Professional Engineers, Geologists and Geophysicists of Alberta Canadian Bar Association Various court cases and legal journals