Due Diligence Checklist

Entering into a contract or engaging in a business relationship with an organisation or individual without full knowledge of their business dealings, past or present, can expose you to significant risks. Yet every year, businesses around the globe do just that. 

Formulating and executing a comprehensive due diligence process is essential. Whether preparing for a merger or acquisition, raising capital, or extending a partnership arrangement, a thorough due diligence questionnaire (DDQ) will address a number of metrics ranging from financial to legal to operations – all of which should be verified before completing any transaction.

A detailed review of new and existing clients, business partners, and third parties should also expose key issues relating to bribery, corruption, financial crime, governance and other potential risks. More importantly, you can safeguard your reputation and be assured that you are complying with regulatory requirements.

Working with a flexible, configurable due diligence process

How do you protect your organisation from risks posed by third-party relationships?

There is no one-size-fits-all approach to due diligence. At its essence, an effective, enhanced  DDQ is proportionate to the scope of your business undertaking, risk exposure, and business needs. Working with a flexible, configurable DDQ report enables you to identify the intelligence you need, reduces your costs and simultaneously ensures the fastest possible turnaround time. 

Such a checklist will by definition need to encompass a broad range of matters. Areas of importance include, but are not limited to, these 10 areas:

  1. Organisation, ownership and control of the company, including legal entities that comprise the company. A list of all jurisdictions in which the company is qualified to do business and all other jurisdictions in which it owns or leases real property or maintains an office.
  2. Assets and operations, such as annual financial statements with notes thereto for the past three fiscal years.
  3. Intellectual property, including all patents, trademarks, trade names, service marks and copyrights owned or used by the company.
  4. Studies, appraisals, reports, analysis or other market reports concerning the company going back at least three to five years. These could include information on the competition, products, pricing, technological developments, etc.
  5. Annual, quarterly and current financial reports submitted to governmental oversight bodies.
  6. Compliance with laws, particularly those pertaining to authorizations, registrations, concessions, and other operating matters issued by governmental authorities.
  7. Environmental matters, including environmental audits or site assessments and inspection reports prepared by government agencies or insurance carriers.
  8. Litigation is a critical criterion for examination. This includes arbitration and governmental proceedings – past or present. It’s advisable to include any matters which were material to the company and adjudicated or settled in the last ten years.
  9. Significant contracts and commitments, including contracts relating to proposed reorganisations, acquisitions, mergers or changes in control. It should also include all joint venture and partnership agreements.
  10. Any and all tax matters, including all state, local and foreign jurisdictions in which the company pays taxes or collects sales taxes from its retail customers.

The above is just a start. Protecting your business from the unexpected starts with a robust, extensible, fully-featured due diligence process and accompanying due diligence questionnaire. Get in contact with ethiXbase today for a comprehensive and cost-effective approach to your due diligence.

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