Due diligence is a practical risk-management step before appointing suppliers, contractors, consultants or business counterparties. It helps identify integrity, reputational, operational and legal risks before commitments are made.
Supplier due diligence should go beyond checking registration documents. It should consider beneficial ownership, directors, adverse media, litigation indicators, conflicts of interest, business capability, tax and compliance indicators where available.
In higher-risk environments, such as mining, security, construction and procurement-heavy operations, supplier integrity reviews can prevent significant losses and reputational harm.
Red flags include recent company registration, unclear ownership, related-party indicators, adverse media, unexplained pricing, inconsistent documentation, limited operating history or links to employees.
Due diligence should be proportionate to the risk. A low-value supplier may require basic screening, while high-value or sensitive appointments may require enhanced enquiries and background verification.
An effective due diligence report should clearly separate verified facts from indicators and assumptions. It should also identify information gaps and recommend whether further enquiries are required.
Due diligence is not a once-off exercise. Supplier risk can change over time. Periodic reviews, especially for critical suppliers and contractors, help maintain integrity and reduce exposure.
Author: Adrian van Straaten, CFE | IAFCI