Welcome to this week’s Third Party Thursday! My name is Wendy Davis, i'm the operations manager here at Venminder.
Today we are going to talk about the hazards of an incomplete or inefficient due diligence process. We never like to focus on the negatives, but sometimes it is important to point out where pitfalls can occur and how to prevent them from happening.
A big hazard of incomplete or ineffective due diligence is the failure to uncover potential fundamental issues in the relationship. Obviously, if you’re doing due diligence well prior to the contract is signed, this is an excellent opportunity to determine items that may be a real showstopper to the overall situation. And its important if you’re doing due diligence to do this at the time when you have the opportunity to address any issues and resolve them prior to the contract.
Second hazard is not properly knowing whom you’re doing business. Proper due diligence a terrific opportunity to understand what is the ownership of the company look like and what do you need to know about those people that own the company, are they potentially politically exposed persons? Can you run an OFAC check on them? Obviously, you want to know as much about the ownership structure as you can prior to signing the contract.
The next hazard is the inability to proactively anticipate future problems. I can’t tell you how many times we found something and then looked back with the benefit of hindsight and said wow we really should’ve covered that early in the relationship.
The fourth hazard is the inability to protect your company , your customers and they underlaying data from possible breaches or data intrusions. This can be discerned easily in looking at their network diagrams, any penetration testing that’s been done and the resolution of data at the end of the relationship.
The fifth hazard is not covering regulatory guidance. Obviously, all the regulators have spoken up on the importance of adequate due diligence and prescribed certain standards but if you’re failing to follow that regulatory guidance you may not be taking into account things that may be a precursor for future problems in the relationship.
And then finally, the inconsistent application of standards. Often referred to as the brand name approach, where you simply take at face value the work done by Apple, Google or PayPal because they clearly have a great brand name so why worry about doing due diligence? Well its incredible important that you still identify areas that may represent a real concern for your organization.
It’s important to keep these 6 hazards in mind as you do due diligence on your vendors.
Again, I’m Wendy and thanks for tuning in to this week’s third party Thursday; if you haven’t already done so, please subscribe to our series.