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Due Diligence is required to mitigate the risks in supply chain.
- It assess the risks involved in procurement process. Also calculates the common strength and weakness of procurement.
- Complete suppliers evaluation which includes technical & commercial competitiveness and most prominent is committment.
- Consider company policy and its attributes.
Duty of each party to investigate and gather infos before entering into a contract or transaction.
‘Due Diligence’ in procurement is basically mitigating, managing risks in your supply chain. It is the process of independently verifying a supplier’s capability to deliver fully against their contract. It is generally done at the stage of final evaluation/negotiation.
In procurement, due diligence means checking that your supplier:
*is who they claim to be
*is financially sound
*has the capacity, capability, expertise and motivation to deliver
*has the systems and processes to deliver
*has a strong understanding of the contract deliverables and requirements and its obligations under the contract.
The test is the supplier’s ability to deliver not only at the initial stages, but throughout the life of the contract.
There are number of methods for conducting this activity.
The nature of due diligence and level of investigation should match the nature of the contract. High-risk, high-value, complex or unique procurement activities will require a comprehensive due diligence, while some basic checks may be sufficient for simple, routine procurement activities.
Conducting a ‘Due Diligence exercise’ will add value to your procurement process by:
*Helping you make more informed decisions
*Better understand the unique risks related to the supplier/company
*Manage supply chain risk more effectively
Duty & RESPOSIBILITY of any Director - Leader - Manager - or even any stakeholder or responsible person to assess, evaluate any risks , gather all necessary information on potential risk involved in any transaction.
