Some while ago I was asked by a fellow Procurement professional what I do. When answering that part of the SCM services/solutions that I specialise in is DUE DILIGENCE consulting, I was ‘gobsmacked” when further asked by the same individual, the relevance and definition of such.
It’s always astounded me as to what the average person takes at face value, especially in the business environment.
Through my Procurement career, and especially now as a private businessman I’ve come to realize that due diligence is more than important to a Procurement and business Executive. It is vital!! The very least important benefit is that comprehensive due diligence saves time through the elimination of time wasters and charlatans at a very early and critical phase.
Due diligence is an exacting process and a necessary task for all, whether their organisations is a SMME, Governmental or a multinational Corporate in nature.
So one may ask what does due diligence entail. Well here simply put, it involves taking interlocking measures that mean a continuous over- arching value added evaluation is undertaken, whether looking at a new supplier, joint venture partner, or on any other business activity that involves unknown entities or individuals interacting with your business operations and culture. All care should be taken thru a comprehensive process to ensure that you know exactly who and what you are dealing with at all times.
Sure, you might now be thinking that all this is just common sense. In reality, due diligence is and should be a thorough and comprehensive process. This means due diligence auditing is all about validating facts and credentials, eliminating assumptions and digging up more information about your business network partners.
You will be amazed at how seldom it is conducted properly, if even at all.
Due Diligence Checklist
Depending on the nature and reason for why a due diligence audit is required all or some of the below should form a basic part of a comprehensive due diligence check list
- Company registration details (Cipro check) if dealing with a organisation or individual outside the scope of a Sole Proprietor
- Is company trading as original registered name, if not what are the details
- List of directors, members or other interested parties
- Check on background to these individuals (dual or foreign nationalities, experience, criminal and blacklisting checks)
- If foreign national how long has he/she been in resident in RSA, lived where else, and if required background into that past
- How long has an individual been self- employed (important with Sole Proprietors and businesses) and operational?
- What size of projects, supply contracts etc. have they worked (important with Sole Proprietors and businesses)?
- If deposits are required, scrutinise percentages required. If large (45% or more, investigate the reason)
- How long has organisation/individual been involved in business activity of mutual interest
- Professional Image and reputation of the operating vehicle or individual
- Operating, Management and Organisational Infrastructure
- Client references and previous “project showcases (sometimes the reference needs to be checked as well)
- Duration of operating vehicle’s existence as a “going concern”. Remember that registration numbers is by no means an accurate indication. (Could registered and then laid dormant for several years)
- Site/Corporate Office Visitations
- Backroom checks ( Should the party with that you are dealing with, have third party involvement in order to execute the work/project etc., check them as well and as thoroughly)
- And in a uniquely South African context, BEE status if required for the purpose in hand
The above is merely the basic components of a comprehensive checklist, bearing in mind that any such checklist is a ‘live’ document that needs to be modified and adapted to each individual case scenario.
What are your views?
For any further information pertaining to this subject please feel free to contact Karl Furrutter directly at firstname.lastname@example.org .