Importance of Due Diligence in Risk Management of the Company!
At various point of times every business needs to rely on third parties such as vendors, suppliers and contractors. These third parties not only help the business in outsourcing their work and build business but them also come quite handy in managing any kind of fluctuations in the operations of the business.
But of course, you and your business can reap all the benefits of associating with a third party when you have performed proper due diligence and found out that the third party is compliant to various rules and regulations and is worth the association. Lack of this compliance due diligence may put you and your company at the risk of fraud whose wrath will be suffered by you, your reputation and your business.
Keeping all these things in mind, there is no denial of the fact that third party due diligence and screening of company and policies of the vendor under consideration is very important. Without a thorough due diligence process any kind of association with any third party will give you a tough time in risk management of your company.
In short vendors due diligence or compliance due diligence can be best defines as the process of identifying the threats and risks involved in associating with a particular vendor or supplier. It also helps in finding the compliance of the third party to save your company from the wrath of regulators and customers.
When should we perform vendors due diligence?
- 1. First and foremost due diligence process should be performed at the time of procurement. When you company issues a proposal for references and set a guideline about the eligibility of the vendors, you should perform due diligence on the applications received. After performing the due diligence you can short list at least four to five vendors for final selection.
- 2. Next step is to perform due diligence on the short listed vendors. They should be checked by each and every department of the company such as information technology, human resources, sales, accounts, legal team and marketing to find whether the vendor under consideration is compliant as per the rules and regulations and is in accordance with the company policies or not.
- 3. Once you get a green signal from each and every department after a thorough compliance check is complete, you can make the final selection of the vendor.
- 4. During the entire due diligence process, it will be very important to determine the level of any risk that the vendor can pose to the company and which and to what extent the vendor will be having access to the company’s information.
Check out Netrika.in for compliance due diligence and third-party due diligence.