Business Partners Under Scrutiny: Companies Must Review Potential Partners and Subcontractors
In today’s complex business landscape, companies are facing unprecedented challenges in identifying reliable partners and subcontractors. To mitigate risks and ensure compliance with regulations, a thorough due diligence process is essential.
Why Due Diligence Matters
A recent investigation has highlighted the importance of reviewing not only existing but also potential business partners and their subcontractors. The review includes assessing various aspects:
- Head Office: A comprehensive analysis of the partner’s headquarters, including its structure, management, and operations.
- Red Flags: Identification of warning signs or irregularities that may indicate a higher risk.
- Negative Reporting: Review of international press reports to ensure the partner has not been involved in any scandals or controversies.
- Sanctions Lists: Checks against global sanctions lists to prevent involvement with entities or individuals subject to economic sanctions.
- PEP Lists: Verification of Politically Exposed Persons (PEPs) and their connections to ensure compliance with anti-money laundering regulations.
- Financial Reports: Review of financial statements, including balance sheets, assets, liabilities, and budgets.
- Work Processes: Assessment of the partner’s operational processes, including quality control measures.
- Employee Qualifications: Verification of employee qualifications and experience.
- Company Image: Evaluation of the partner’s reputation and brand image.
- Board Members and Shareholders: Review of board members and shareholders to ensure they are not subject to sanctions or have a questionable background.
Automating the Process
With increasing complexity and volume of data, manual due diligence processes can become time-consuming and resource-intensive. Companies should consider leveraging technology to automate checks, support investigations, and ensure continuous risk monitoring.
Assistance from Experts
Our third-party due diligence software provides a comprehensive solution for companies seeking to streamline their due diligence process. Our experts execute due diligence with the sole goal of producing valuable reports and business analyses that inform decision-making and negotiation processes.
The most common forms of due diligence checks include:
- Economic, Technical, and Organizational Reviews
- Manager and Staff Checks
- Legal and Tax Reviews
- Operational Due Diligence to assess risks and appreciation potential
- Market Due Diligence to analyze the current and future market position
The due diligence process typically consists of three steps:
- Identification: Gathering information about the partner or subcontractor.
- Sanctions List Check: Verifying against global sanctions lists.
- Risk Assessment: Evaluating potential risks and providing a report.
Frequently Asked Questions
What is Due Diligence?
Due diligence refers to the exercise of reasonable care in the course of business, involving the review of potential partners, subcontractors, and other stakeholders.
Who Needs a Due Diligence Check?
All companies and organizations that engage in company mergers or acquisitions, or work with international partners, require a due diligence check.
Why Do Companies Need a Due Diligence Check?
Due diligence helps protect interests, safeguard the value chain, and comply with regulations on sanctions, money laundering, bribery, and corruption.