Business Success today is a collaborative result. Organisations work with third party vendors to create winning business models. It is imperative to conduct a thorough due diligence of vendors before basing trust and putting your brand at stake.
Business due diligence helps you partner with capable entities that help grow your business and keep it secure from a regulatory/compliance perspective. Business alliances and partnerships should be established only after obtaining all the information related to investment, vendor, partner etc. Therefore, vendor due diligence is important before finalizing any vendor for business relationships to mitigate risks associated with it.
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Vendor Due Diligence- More Information
Vendor due diligence is an essential step before finalizing any vendor. Vendor due diligence presents a complete 360 degree view of the subject from various perspectives including company vitals, financials, operational capability, strengths and weaknesses, core competency, market reputation, credit health and much more. It is a barometer of the vendor’s identity, profile and reputation.
Vendors are partners to a business’ success and impact your brand and financials. Such critical decisions should be made only after screening through expert agencies and consultants. While vendor due diligence may be conducted either via web or via standard tools available online, using such web & online tools makes in-depth understanding deriving meaningful insights difficult. This makes the decision-making process complex and time consuming.
That is why expert’s investigation supervision is required. Outsourcing assignments to vendor due diligence agencies can save a lot of efforts & valuable time while getting access to unbiased, comprehensive insights about the business entity being probed. Outsourcing vendors have necessary domain expertise & years of experience in uncovering frauds associated with business.
Using comprehensive research, it is very easy to obtain unbiased results in easy to understand format.
Vendor due diligence is an absolute must to winning partnerships.
During Vendor Due Diligence, special emphasis should be paid to checking the reputation and character of vendors to mitigate risks related to reputation. The vendor due-diligence process should include a thorough evaluation of all concerns that might affect the reputation of the brand, including factors such as pending lawsuits, ineffective quality measures or product-testing, liability concerns etc. The following should be considered as a vendor due diligence checklist to build trust:
• Financial details including the overall financial profile, stability and legal problems
• Directors & Management
• Credit ratings
• Legal or regulatory compliance
• Shareholding patterns
• Financial details
• Related companies
• Database & media checks
• Organizational capacity, operating procedures
• Organizational structure
• Data security systems
• Building or personnel security
• Insurance coverages
Vendor Due Diligence- Process & Reports
With more organisations going the outsourcing and collaboration route, alliances are becoming a crucial ‘success’ factor.
Vendor due diligence provides thorough details of the financials & reputation of the businesses before entering into the contract. It is essential for an organisation to conduct due diligence on media mentions, organizational structure, insurance, legal, tax & other elements related to identity, profile and reputation.
Vendor due diligence is long term investment to mitigate risk. Below are a few arguments which build a convincing case for Vendor Due Diligence:
1) Vendor due diligence reassures vendors about financial information and provides a better overview of the course of the transaction. It enlightens the dark areas which may affect the productivity.
2) With due diligence, a vendor better understands the features & possible drawbacks of the business.
3) Vendor due diligence ensures that partner is legally compliant and adhere to guidelines/standards set by regulatory bodies like US FCPA, UK Bribery Act, Indian Prevention of money laundering Act & moreover, doesn’t have any record of compliance breach.
4) It reduces the possibility of tying up with a fake organization/partner and assures the authenticity of the claims made by partner.
5) Regular vendor due diligence is the best practice to be incorporated to deal with unforeseen, unfair & unethical practices.
In all, Vendor Due Diligence has long term benefits and should not be overlooked!
Vendor Due Diligence Reports are created after a thorough evaluation of various aspects of a business entity.
The process of creating a vendor due diligence report starts with finalizing the scope of the research and the areas to be covered in the report. The above stated areas (Vendor Due Diligence Checklist) areas are a representative sample of the areas which can be assessed with vendor due diligence. Using online information from various sources and some readily available tools, information is gathered in one place. This information is then analyzed to identify current marketing trends and relevant insights are filtered to draw insights.
The dots are connected to deliver comprehensive, compliant & accurate overall view of the organization in easy an easy to understand format.
Vendor Due Diligence- FAQs
A due diligence checklist is the set of parameters which needs to be evaluated as a part of vendor due diligence before signing off an alliance/partnership. Vendor Due Diligence checklist should include reviewing the company’s financial details including the overall financial profile, stability and legal problems operations, legal, compliance, tax, people and customers.
Vendor due diligence process is a step by step process of evaluating a business model and its associated factors- operations, financials, compliance, legal, tax, people, shareholdings, credit, media reputation and other factors that make a difference to your investment/alliance decision.
A vendor due diligence report consists of an objective evaluation of the target’s business model, its operations, financials and multiple other parameters. All the Inferences derivations are based on the facts drawn out of Ministry of Corporate Affairs(MCA) or other equivalent sources.
The inferences along with the supporting evidences are compiled along with recommendations and presented in a Vendor due diligence report.