Due diligence is a crucial aspect of making informed choices particularly prior to an important transaction like a merger or an acquisition. The process involves researching and evaluating different aspects of the venture or other entity to ensure that all parties are aware of the risks that are involved. Due diligence can be financial, operational or legal.
Financial due diligence involves examining the financial health of a company by examining profit and loss statements, balance sheets, and other documents. This enables stakeholders to spot possible risks and determine if the company is suitable for their investment. Operational due diligence checks the quality of management, IT systems, and production capabilities. This could reveal hidden risks and liabilities which may not be disclosed by financial records.
Legal due diligence is the review of all legal documents, including license agreements, contracts, lawsuits pending and other legal documents. This can reveal any legal risk and liability, as well as ensuring that the business is adhering to all legal requirements.
Due diligence in pursuing sustainability is becoming more vital as https://savvysocialimpressions.com/virtual-boardroom-tools-top-features-for-seamless-meetings/ employees and customers demand that companies take positions on green issues such as carbon neutrality. Due diligence can uncover a variety of issues that must be addressed, ranging from how a company manages its environmental impact to the way it handles recycling, and other sustainable practices.
