Due diligence is a method that helps identify risk factors. These risk factors are dependent on the type and nature of the business. Banks or financial institutions, for example, may require a higher level of due diligence than retail stores or ecommerce companies. A company with a global presence may require a review of laws specific www.getvdrtips.net/angel-investor-due-diligence-checklist/ to a particular country that affect its operations more than a single domestic customer.
One of the most important risk factors companies should look out for is whether the customer appears on sanctions lists. This is a vital check that must be conducted prior to any contract is signed, particularly in the event that the client may be involved in illegal acts such as fraud or bribery.
In a due diligence exercise it is crucial to consider the extent of dependence on specific people or entities. A company’s dependence on its owners or key employees may be a red light that could result in unexpected losses if an employee is suddenly dismissed from the company. Another consideration is the amount of shares owned by the top managers. A high percentage is an excellent sign, while a low level is a sign of danger.
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