What is a Due Diligence Investigation?
The term Due Diligence refers to a variety of situations in which a more thorough investigation might be needed in place of a traditional Background Check. Due Diligence Investigations can be conducted on either a private individual or on a business, and in circumstances in which there is potential for the signing of a legally binding contract and/or the possibility of becoming legally responsible in some manner for a given entity. The perfect example of the need for a Due Diligence Investigation rather than a Background Check would be in vetting a potential CEO/COO/CIO candidate or any other potential Officer of a business to ensure – insofar as is legally possible – their integrity and reliability as a corporate steward. Alternately, a Due Diligence Investigation might be more appropriate than a traditional Background Check where a prenuptial agreement might be sought. Simply stated, Due Diligence means taking measures any reasonable person would before entering into a legally binding contract or agreement, or entering into a transaction with another party to ensure fitness for the potential partnership or business agreement.
When is it Necessary?
Overall and regardless of the type of Due Diligence Investigation needed, Due Diligence Investigations are designed to mitigate risk through pre-transaction or pre-employment corporate investigation designed to uncover details of a company’s management, finances, performance, mission, history, aims, suppliers, clients, industry and any other pertinent details that may affect how a company does business. Due Diligence is a critical step before a merger, company purchase, or acquisition because it ensures that liabilities are not hidden and ensures to a reasonable degree that there will be no unpleasant surprises.
Extensive. Thorough. In-Depth.
The tools used for a Due Diligence Investigation may include forensic accounting investigations, background checks, surveillance, mystery shopping, asset searches, financial investigations and other business investigation methods as determined by the individual clients needs. Additional tools may include the acquisition of public records, client and customer interviews, and overseas travel to outlying business locations to authenticate the legitimate presence of the entity. It is critical to understand that Due Diligence Investigations take significant amounts of time and resources to conduct properly and is not an investigation that can be done well overnight, as it were.
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