What Is A Due Diligence Investigation?

When a business and an individual work to reach a deal, it has become common practice for one or both parties to conduct a due diligence investigation on the other party. With as many possibilities for risks as rewards in certain engagements, due diligence offers peace of mind.

In some situations, companies face serious negative consequences if they take on a risk-laden business deal. Factors including anti-money laundering laws such as the USA PATRIOT Act and anti-corruption laws including the U.S. Foreign Corrupt Practices Act have squarely placed the responsibility on businesses to know their customers through more than a handshake. A thorough due diligence investigation is essential in these situations.

Below, let’s examine due diligence investigations and how they can protect your business.

Due Diligence Investigations 101

What is a due diligence investigation? Sometimes called an audit or review, a due diligence investigation has become the standard path toward confirming facts and details about a business, individual or matter under consideration. It is a process wherein someone in your organization or a professional background check firm searches to find any hidden liabilities before entering a contract with the other party.

Corporate due diligence investigations provide additional pieces to the puzzle to help ensure you know the benefits and risks of making a crucial business decision that involves another party. Once you have completed your due diligence, you should feel more confident in making a sound business decision on the matter.

Reasons to Conduct a Due Diligence Review

Now knowing that a due diligence review focuses on business dealings, you might wonder what types of business decisions require such an investigation. Think about times you wanted to onboard a specialized contractor or a new business partner.

While these individuals may offer great rewards with their skills and knowledge, they might have something in their background to put your organization at risk — potentially harming your business reputation or operations.

If any party has misrepresented its background for itself or its business, the results could decimate your business.

What Information Do You Want to Learn From a Due Diligence Investigation?

A due diligence investigation takes a deep dive into the history of an individual, business, property, or other target or subject. The audit can uncover anything from unethical to illegal activities that the subject has managed to suppress. By probing into the subject’s client history, reputation, finances and past performance, you can learn all you need to know.

Here are some details you might discover during the due diligence process:

  • A history of litigation, whether instigated by the subject or someone else against the other party for accusations of fraud or mismanagement
  • A history of financial problems, including foreclosures and bankruptcies
  • A criminal history
  • An undisclosed previous business dealing or other affiliation with an associate or business with a poor reputation
  • Any information that indicates a business is not as healthy as the leaders presented

What Kind of Research Should You Do for a Thorough Due Diligence Audit?

If you’re considering a due diligence audit, you might wonder what type of research you should conduct. Here are some specifics you or your investigator might look at when launching an audit:

  • Employee information, such as past positions held and the duration and feedback for each
  • Company history, including media and legal research
  • History of sales and acquisitions of a business or property
  • Assets, including real and intellectual properties
  • Past and current inventory
  • Debt and equity
  • Litigation history initiated by or against the audit subject
  • Information systems and compliance audits
  • Marketing campaigns
  • Professional licenses
  • Bankruptcy history
  • Liens and foreclosures

At Global Verification Network, we understand the weight on your shoulders in making large business decisions that put your company at risk. We will conduct thorough due diligence to give you peace of mind to make or break the deal.

Contact us to learn more about our detailed due diligence investigations.