Today business and trade is a global affair. The competitive field has expanded and more and more companies seek out business relationships that will give them an edge over their competitors. Supply chain relationships can make or break your business.

Working with unknown third parties can come with a risk to your company. Supply chains are complex thereby increasing the risk of companies working with one or more entities that are involved in illegal unethical practices. These practices can include corruption, fraud, money laundering, human trafficking, drug smuggling, slavery and environmental damage.

What Is Due Diligence

Due diligence is essential before you conduct business with a third party internationally. Due diligence is concerted efforts taken to investigate a potential third party. Third parties in today’s modern supply chain include anything from suppliers, distributors, agents, advisors, consultants and can even include customers. Due diligence should include everyone up and down the supply chain. 

Investigation Tips

The goal of due diligence is to discover any corruption risks associated with any third party in your supply chain. Before conducting business with a third party internationally you should conduct some initial investigation into the third party to determine if you want to proceed with doing business with them at all. Initial investigation should include references, import/export experience, financial standing, and awareness of Canadian importation rules.

1. Request And Vet A Company Profile

Request a complete company profile. You can provide them with one of yours. You can then check the information in the company profile from other sources. Treat this like a job screening for a potential employee. 

2. Utilize Screening Tools

Perform a due diligence screening by conducting the most simplest database risk assessment. Credit and business background information can be found at:

• Dun and Bradstreet Reports - For Canadian Companies
• EDC Export Check Reports - For international/non-Canadian information

3. Conduct An Internet Search

Performing an internet search on a company can sometimes reveal potentially adverse information. Open source reviews can lead to further investigation of local civil and criminal litigation, bankruptcy and insolvency.

4. Review References 

Take the time to look at references submitted and in addition take a look at the local intelligence about the third party. From this you can assess their reputation. 

Once you have risk-assessed your third party and they present little to no risk, you can then make a decision to include them in your supply chain. Continue to monitor their risk as this can change over time.

The current complexity of today’s supply chains means that many companies still have no idea what risks exist for them as a consequence of someone in their supply chain. Companies should always investigate all third party contacts before working with them. Due diligence on your supply chain can be very time consuming. There are a number of consultants and companies that can assist in setting up your company’s due diligence program and subsequent monitoring system if you find this is too overwhelming to do yourself.