What Due Diligence and Risk Management Practices Entail Third parties are important facilitators of a firms operations. This third parties include shareholders, suppliers and other entities. This move however is faced with a number of challenges. The number of issues that may raise risks are such as compliance factors , environmental issues, political and legal factors, health and safety factors among others. The companies have to go an extra mile to ensure that they are not entangled in issues that may spell disaster. This necessitates the need to perform due diligence and risk managements operations. The initial step should be to assess the third party. That is they should familiarize themselves with what the third party is bringing to the table. The political affiliations and practices furthered by third parties should be understood well by the business that work with them. This will form the basis on the decision to allow them to factor in the business or refute them. They should ascertain that the third party in question does not flaunt any statues that guide their operations. They should be in the light on the risks that are likely to present themselves while working with third parties. There are always risks attached to the activities that businesses embark on. The risk of loss of capital is real for investments. The aim of any business is to make profit and some investments may not necessarily present that advantage. The ability of a project to cough out income from the investment that has been made should be a key factor in dictating whether to invest. There is also a limitation that can be caused by friction between third parties and their employees. They need to be very precise on how they expect the third parties to behave with respect to their staff as it may come back to bite them later. The use of middlemen in the transactions should be reduced significantly to only accommodate those that are absolutely necessary. The consumers concerns should take first priority to alleviate the feeling of disapproval by clients.
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There should be on going efforts to ensure due diligence and risk managements efforts are being undertaken even after reaching an agreement with third parties. They will be useful in catering for change of patterns in the operations of a third party. Due diligence and risk management practices aids in the identification, assessment and mitigation of risks before they escalate and pose threats. This allows the company to work around risks as they expand their operations.