Types of Due Diligence
Due diligence is a vital element of informed decision-making, particularly in the case of a major transaction like a merger or acquisition. The process involves investigating and assessing various aspects of the venture, company or other entity to ensure that all parties are aware of the risks that are involved. Due diligence could be operational, financial or legal.
Financial due diligence involves edge computing: bringing processing closer to data sources examining the financial health of a business by reviewing profit and loss statements, balance sheets and other documents. This helps stakeholders identify possible risks and determine if the company is a good fit for their investment. Operational due diligence examines the performance and capabilities of management IT systems, management, and production systems. This can reveal hidden risks and liabilities that might not have been disclosed in financial records.
Legal due diligence involves an examination of everything legal including contracts, licensing agreements, pending litigation, and other legal documents. This can uncover any legal risks or liabilities, while also making sure that the business adheres to all legal requirements.
Sustainability due diligence is becoming more important as consumers and workers require companies to stand up on environmental issues, like carbon neutrality. Due diligence can reveal a myriad of issues, like how a company handles their environmental impact, or how they deal with recycling and other sustainable practices.
