Vendor Due Diligence: 3 Common Pitfalls Your Companies Must Avoid
Running due diligence on prospective vendors is a logical way to minimize all potential risks that may arise once the cooperation runs. The thorough and well- executed due diligence brings the valid outcome which is key for business in selecting the right vendor. There are three common pitfalls that companies must avoid in order to obtain valid due diligence results.
1. Not completing information
Generally, companies only rely on their employees to complete internal documents. In addition, they often do not create special questionnaires for prospective vendors. Therefore, it is not surprising that they only obtain general information whereby the red flags remain undetected. The companies need to tighter scrutiny, for example checking and analyzing prospective vendors’ data related to breaking up contracts with their business partners.
2. Not verifying information
All information provided by prospective vendors must be verified. Failure to verify increases the potential risks. Verification can be done by checking the field or checking certain information, for example, litigation and bankruptcy checks. Of course, you need to go down on it as your company does not want to get an unfavorable surprise in the middle from a vendor who turns out to have a legal problem.
3. Not acting immediately on the smallest suspicious finding
The slightest details – inconsistencies or problems – encountered during due diligence must be followed up. Should it is necessary, companies can hire an outside investigator to investigate the findings. Ignoring the smallest findings can potentially bring a huge problem to your company in the future.
Many companies are trapped in these three common pitfalls because they do not have enough resources, energy, access, knowledge and time to conduct due diligence thoroughly. Let’s say your company has a prospective vendor outside the city. However, your company may not have enough assets in the city to carry out field checks or may find any difficulty in gaining access to certain data, thus hampering the verification process.
In order for your company to avoid three common mistakes, it is strongly recommended to use the third party who has competence in the vendor due diligence, such as Integrity. Through Know Your Vendor services equipped with Vendor Management Systems, Integrity offers comprehensive and practical vendor due diligence solutions that can be tailored to your companies’ needs.