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Why Can Vendor Due Diligence Be A Good Investment?

By Author: Naman Vohra
Total Articles: 42

In quest of operational efficiency, organisations often partner with other entities. An entity planning to partner with a vendor company must do proper scrutiny of the prospective vendor before joining hands. A company should obtain a more detailed overview of the features and conditions of the asset of the future vendor before collaboration. It is customary for an organisation to conduct legal, financial, tax, environmental or economic due diligence.

Vendor due diligence is a verification process that can provide assurance to an organisation about the prospective vendor. Assigning the work of due diligence to a risk assessment company can save a lot of valuable time and efforts of an organisation. By carrying out an exhaustive set of checks like address, reference, criminal record checks enough vital information can be gathered about the opposite entity and the people associated with it, thus leading to a safe and risk mitigated decision.


An organisation can conduct due diligence on a prospective vendor through a third party risk assessment company to establish the authenticity of the entity. Vendor due diligence will verify whether the claims of vendor such as government registration is valid or not which will save the organisation from empaneling with a fraud vendor. Vendor due diligence also helps in bringing out the compliance history of the prospective vendor as any discrepancies can land in serious trouble. Additionally, in the process of vendor due diligence, the vendor is screened for various national and global regulations like UK Bribery Act, Indian Prevention of Money Laundering Act to ensure that the prospective vendor is compliant to all the regulatory bodies. By following the process of vendor due diligence, an organisation is capable of looking into the authenticity of the vendor by verifying the documents related to vendor in question. In order to gain more clarity on the vendor’s background, Vendor due diligence also checks if there is any political affiliations or if the entity is involved with any illegal organisation. In addition to above mentioned checks, vendor due diligence also helps an organisation to understand the prospective vendor by conducting reference check with previous or current client of the entity. This process will also help in getting a better view of the quality of the services provided by the prospective vendor.

By taking the above points into consideration it can be concluded that vendor due diligence is a good investment which empowers the organisation to take right decision before partnering with a vendor that will save the organisation from future hassles.

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