Types of Due Diligence
16 May 2024 - 00:00 WIB
Due diligence is a vital element of many transactions and investments, as well as other kinds of business. It helps companies make informed choices and assess the risks, opportunities, and compliance requirements. It includes conducting in-depth investigations, assessments, and analyses of information and data, usually from external sources, but also internal ones.
Due diligence could be operational, financial or strategic. Here are some of the most commonly used types.
Financial due diligence includes reviewing the financial statements of a target company and identifying red-flags, like inconsistencies in accounting. It also includes analysing the company’s business model competitive position and the leadership structure to determine if an acquisition is sensible.
Legal due diligence studies capitalizing on VDR’s remote access feature for agile operations areas like legal and corporate structures commercial contracts and employment agreements, intellectual properties, information systems environmental health and safety and safety, regulatory compliance and taxation, and property. Due diligence of this kind will help buyers identify the strengths, weaknesses and potential problems. It will also help them negotiate the most advantageous deal.
Customer due diligence(opens in a new window) is an essential part of the Know Your Customer (KYC) process and is required under FATF-compliant law by all financial institutions. It’s designed to ensure that customers are who they say they are, and are not engaging in terrorist or money laundering financing. It involves collecting information from customers, including their full names along with their birth dates addresses, addresses, and other contact information. It also involves confirming their identity by asking for evidence of identity documents and checking them against third-party databases, and then analyzing their behaviour for possible suspicious activity.
