There are so many ways due diligence can be carried out by businesses. In this article, we will cover the 5 most popular types of business due diligence you should know about.
What Exactly Are Due Diligence Investigations?
Due diligence investigations are a form of detailed risk analysis that a business or individual can perform before entering into an agreement or contract with a third party.
In the UK, due diligence can sometimes be a legal obligation and necessary for you to remain compliant with money laundering regulations. It can also protect you from offences such as identity theft, financial fraud, terrorist financing and other criminal activities.
1. Company Investigations
One of the most popular forms of due diligence is conducting company investigations. This type of service only applies if you are a) just about to enter a new business relationship, b) considering investing or c) you’re just concerned about the finances of a company you’re currently working with.
Depending on your requirements, a company investigation could entail an in-depth analysis into the company’s directors, finances, suppliers, historical data and competitors. This includes the monitoring of stock and equipment levels and taking note of assets, such as vehicles and tools.
You can take it one step further by utilising services such as mystery shopping assignments and test purchasing. These types of services involve employing underage shoppers to visit a business to see whether they can purchase age-restricted goods.
2. Know Your Customers (KYC)
Know your customer (KYC), sometimes referred to as know your client, is a type of due diligence that deals with businesses authenticating the identity of their clients and assessing whether there any illegal intentions for the business relationship.
Other checks that can be involved in KYC process are cross-referencing your customer’s name against lists of known parties, a holistic risk analysis based on the customer’s past and expected behaviour, and constant monitoring of the transaction with that customer.
To ensure compliance with the stringent anti-money laundering regulations in place in the UK, businesses need to have comprehensive KYC procedures in place. Failure to do so can bring about severe legal repercussions for you and your business.
3. Competitive Intelligence
Similar to company investigations, competitor intelligence is one of the most important investigative services your business will need to flourish.
This type of due diligence reporting gives companies comprehensive business intelligence on their competitors and rival markets, so they can create more effective business strategies and make more informed decisions.
Investigators define, gather and analyse rival business data to cultivate a highly detailed portrait of the current marketplace. To do this efficiently and ethically, investigators tend to focus on products, customers and any other factors that play a significant role in an organisation’s decision-making process. Sometimes these investigations can even unearth precise intelligence not normally available to the public.
In short, every single business operating today needs to have up-to-date, comprehensive and accurate data to help them succeed in these highly competitive industries.
4. Employee Vetting
In today’s job landscape, it is estimated that over 80% of candidates provide false information to potential employers. Which goes to the show how crucial employee vetting is to a successful recruitment process.
Although often overlooked by HR departments, employee vetting is a highly effective way of determining whether a potential employee is honest, worthy of your trust and the right fit for your business.
These due diligence investigations can range anywhere from ensuring candidates have not lied on their CV to run of the mill credit checks and criminal background checks.
Investigators will even look into a subject’s references to verify information on foreign applicants, as well as UK citizens.
Not just businesses use employee vetting: parents can hire private investigators to perform nanny background checks for extra peace of mind.
5. Drug Testing
One of the lesser recognised types of due diligence is drug testing. This type of investigation usually takes place during pre-employment checks, and at other times throughout an employee’s time at an organisation.
In today’s drug tests, hair and oral fluid samples are the most reliable methods used to take samples. These are then tested for the presence of Cocaine, Cannabis, MDMA, Methamphetamine and any other common type of drug.
Call us today on 0208 287 7770. Our team has over 20 years of experience in business due diligence.
