DUE DILIGENCE

Problems Faced By an Organization When Conducting Due Diligence in a Global Context

Problems Faced By an Organization When Conducting Due Diligence in a Global Context

Due Diligence

Due diligence is one major form of investigating and inquiring about anything however it can even fail if the process is not followed correctly (Gole & Hilger, 2009, 76). Due diligence, in simple terms means investigating and inquiring about a company, deal, person etc. and is the key for making successful decisions in a business setting. The process of conducting due diligence is complex and not everyone can do it. It requires analytical skills so that the inquirer can make a well informed decision. Due diligence has earned a lot of importance in today's world and is applied to many aspects of life.

Types of Due Diligence

With the increased use of due diligence in today's world, different types of due diligence have evolved (Harvey & Lusch, 1995, 5). Different types of due diligence is used in different settings. Some of them are:

Financial Due Diligence

Legal Due Diligence

Risk and Insurance Due Diligence

Operational Due Diligence

People Due Diligence

Problems with Due Diligence in a global context

There is a need to carry out due diligence in a global business setting. Carrying out due diligence in a global environment is very tough because a lot of factors need to be taken into consideration. Implementing due diligence in today's world is very important but at the same time, it is difficult as well. With the evolved due diligence concepts, many ways have also been evolved to avoid the process of due diligence which has damaged due diligence (Pickard, 2002, 45) . This process is hampered by practices such as fake documents, not revealing complete information or disclosing wrong information, misquoting of prices i.e. those that are different than the ones prevailing in the market.

A number of problems exist with the due diligence in a global setting. People who are being investigated provide fake information and they try to deceive the companies in every possible way if they have had a negative record in the past (Spedding, 2008, 203). Investigating about people has always been a tough job and will remain one given the challenges in the changing world. As this requires to search the past of that person and indentyifying any information that raises concerns for the company or are questionable in nature. Following are the problems that organizations face while conducting due diligence in the global market:

Ignoring External Factors

A lot of factors should be taken into consideration; due diligence in a global context is a big challenge, and the most important factor that should be considered but is usually ignored is the external factor. The external factors play a vital role in investigating a company or a target that the company is looking to acquire. Mergers and acquisitions are the two key areas where due diligence is used the most. The external factors should be kept in mind while carrying out due diligence. As it's not just the internal factors that should ...