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Five Types of Due Diligence

When you’re thinking of an M&A deal, purchasing a new piece of equipment or simply bringing on a new supplier, due diligence is always an essential part of the process. It’s essential to be confident about the people you deal with, and it will help protect your firm from potential risks.

As an entrepreneur, it’s essential to know the different types of due diligence and how they can be applied to your specific circumstance. In this article, we’ll explore five types of due diligence that are applicable across any industry:

Financial due diligence is a thorough examination of the financial history of a company and ensures that the figures are accurate. This includes confirming reports, assessing the true performance of a company, and investigating areas like debt contract, property, and employment.

Operational due-diligence aims at identifying the existing issues that could influence a company’s future performance. If it’s age-related technology, inefficient use of resources, or the absence of real estate assets operational due diligence reveals the risks that could be hidden beneath the surface.

Human resource due diligence is an in-depth look at a company’s employees. This includes reviewing all documents and data about employees of a company, such as contracts and compensation plans, as well as any pending litigation. It also evaluates the company’s culture in relation to its values, perceptions, and working practices.