Nick Day saw the opportunity to put his experience in the intelligence services to use by advising companies on how to deal with emerging markets, writes Helen Dunne

Last Updated: 6:09PM BST 26 May 2009

A former member of the Special Forces and intelligence service MI5, Nick Day saw an opening for a new business in 2000 when British companies were entering emerging markets, such as Russia.

He launched Diligence, a business intelligence agency based in London, to advise individuals and companies on all areas of risk. Mr Day explains: "I thought there was an opportunity to advise companies that would be coming up against unexpected risks and problems, such as fraud, corruption, a lack of transparency and political risks. I knew that these companies would find that there was limited information available to them."

Today, Diligence has about 150 regular clients across the globe, ranging from the London Stock Exchange to the European Bank for Reconstruction and Development; 10pc-15pc have the company on long-term retainer contracts. Annual turnover is just under $20m (£13m).

But when the business launched, money was tight and Mr Day had to persuade his first client to pay his £10,000 bill up front. "We had no finance," he recalls. "It taught us great cash management skills, and we were completely focused on cash flow. We were learning about running a business as we went along."

He also had to persuade clients to use Diligence, which initially operated from a serviced office just off Harley Street in London. One potential client, an Icelandic bank, wanted to visit. "It was the first time we'd ever had a client visit our office so we engineered a few things to make ourselves look busier than we were," he recalls. The receptionist was briefed to ask the visitor "Are you the gentleman from Microsoft?" and a whiteboard in the office was filled with made-up projects and client names. "We had a friend constantly call the office, so the phones were regularly ringing," says Mr Day. "It worked. We got the job and he's still a client."

Diligence believed that it was different from other intelligence agencies because they "often offered too much information", explains Mr Day. "They would offer narrative and advice, which often included rumour and speculation. The client didn't know what was important and what to dismiss."

He adds: "We need to be creative in solving a problem. We are determined and motivated. We are not ‘it's too difficult' people." Mr Day believes his role is most similar to that of an investigative journalist. He stresses the ethics of the company, and disputes allegations made two years ago in Business Week that he once impersonated a British intelligence officer to elicit information about an audit of Bermudan-based investment fund IPOC.

"Diligence and its employees have never been indicted with any criminal offence in the UK, US, Bermuda or anywhere else," adds Mr Day. "Our work led to IPOC being struck off in Bermuda and fined $40m for money laundering offences. It is currently facing criminal charges in the British Virgin Islands."

That is not to say that Diligence doesn't make mistakes. An early client was Enron. "They were interested in trading energy in Europe. We used thermal imaging cameras to test heat generated by different power stations," explains Mr Day. The information allowed Enron's traders to arbitrage differences in production levels between European countries.

Enron's collapse caught Diligence off guard. "It accounted for about 70pc of our revenues at the time," admits Mr Day. He concedes alarm bells should have been ringing because "they were taking longer and longer to pay".

Just recently Diligence received a payment of 30 cents in the dollar for Enron's outstanding debts. "I considered rejoining the services but it was post 9/11 and they took so long to check out returning servicemen that I found some new customers," he laughs.