Risk Management Part One: Due Diligence

Risk Management Part One: Due Diligence

Part One: Due Diligence


Lloyd & Lloyd is indebted to Mr Greg Judd of Judd Commercial Lawyers for the original version of this blog post


What is “Due Diligence”?


Due diligence is an investigatory process which a buyer or an investor carries out before purchasing or investing in a business or a company.  Also, parties entering into joint ventures will often carry out due diligence investigations.

Due diligence investigations are about obtaining information and gaining an understanding of what you are planning to buy or invest in.  In the corporate business context, typically those investigations will involve your lawyers, accountants and often other business advisors that have a particular knowledge or background in the type of business or industry.

The subject matter of the investigations varies both in scope and in detail depending upon the type of business, the amount of money involved and subjective factors.  Generally due diligence should cover: –

  • Taxation issues;
  • Accounting and Records, a review and inspection of the accounting and business records and this involves also a consideration of cash flow and solvency issues;
  • Intellectual property issues, such as trademark protections, copyright protections, currency of patents, registered designs, confidentiality and trade secret protections;
  • Legal issues, these include overall aspects of compliance in such areas as corporations law, contractual procedures with customers and suppliers, work health & safety compliance, employment law compliance and an overall assessment of legal risk management issues (including potential claims/ litigation);
  • Technology and product issues, where the viability of the product or service depends upon technology, particular information technology then the extent to which the business is adaptable to or affected by technology change and the impact of change on ongoing competitiveness of the business products;
  • Commercial matters, these would include consideration of competitors, market share, security of suppliers, continuity of customer loyalty, market plans and business plans, and
  • Management procedures, workplace attitudes, reporting protocols, management platforms and communication generally within the organisation and any key relationships between particular employees, customers and suppliers.


Due diligence is in many ways a similar process to risk management which we will discuss in part two, the former being an external process, the latter being an internal process.  The bottom line for both is to reach a conclusion and assessment as to the corporate/ business health, and what can be put in place to fix or improve various aspects of the business.

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