Vendor Due Diligence: A prospective investment for the future – a check to reduce risk in labour law compliance

In a highly competitive market where businesses operate, to acquire the right vendor for the organization often the process of Vendor due diligence rests primitively to eliminate any possible risk in partnering with a potential vendor. It could either be buyer-side due diligence or seller-side due diligence, before partnering with a client. 

Why is vendor due diligence assessment necessary?

To understand the organization’s legal stability, reputation, threats, or any other issues that are related to an entity’s compliance, vendor due diligence becomes an imperative tool. The comprehensive process varies according to the business operation modules and aligns with the frequency of the risk management. 

What are the objectives?

Having a successful vendor associate is a necessity rather than a want in today’s business world. The due diligence process gives a better understanding of all types of legal risks the companies face. Also, carrying out a set of exhaustive checks will lead it through better decisions. Let’s try and understand the objectives of a vendor due diligence process in detail – 

• Reducing disruption in the business process
• Helping all involved parties in executing the partnership ventures with speed and efficiency
• Providing with certainty, the compliance health of the target vendor and the nature of its adherence to laws.
• Continents monitoring of risks by implementing statutory health & cyber risk monitoring tools to receive alerts based on any negative incident or trends that could lead to a change in the risk associated with a vendor.

Vendor due diligence checklist – What is covered?

Vendors form part of one of the chief sources for running a business smoothly and also successfully; all companies are constantly planning to have long-term strategic alliances to make it more beneficial to both parties. To understand and eliminate the obligations in third-party tie-ups, the vendor due diligence process requires information to evaluate the vendors. 

Company Information  Constitution Reliable References Incorporation Documents  Registrations under all applicable statutes Key stakeholders and beneficiaries

Compliance Health Periodic filing of returns with statutory authorities Appropriate renewal / restoration of licences & registrations Tax documents  Compensation Structure  Prompt remittances of vendor statutory dues, especially labor dues Major non-compliance issues/complaints in the past

Reputational Risk  Reports from government agencies Litigation history of company and employees, if any Checking the target company against global sanctions, and watch lists

Online Security Risk  Penetration testing Online security policies Compliances such as ISO 270001 History of data breaches and online frauds

Operational Risks  Business continuity plans Code of conduct handbooks Employee lawsuits and attrition rates

How does Versutus help? 

When there are enormous hidden factors to run any business with utmost compliance, it becomes a mandate that we go for an alliance with an entity after comprehensive research and analysis of the vendor background and present stature. Vendor due diligence is a long-term ongoing process, and looking at it as an investment alone shall accelerate business processes, saving from unwarranted threats to compliance reputations and cost-effectiveness. Moreover, Versutus shall flag off the quiescent & hidden issues that bring control over vendor relationships.