What is Due Diligence and How Importance Is It?

29

Due diligence is a big aspect of any business transaction. It is something that should not be taken for granted whether the transaction is a purchase of stocks, assets or as big as mergers. In fact, due diligence is not limited to these transactions. For one, because insurance is part of the assets of all companies, due diligence is part of the review of insurance policies–the extent of liability and coverage and what not. The insurance program often has plenty of overlooked aspects and these things are important in determining the value of an asset or its protection from liabilities. Due diligence should cover these often overlooked matters.

A good starting point is the company’s policies. So the buyer or his representative should check all of the insurance policies pertaining to what is being sold. In the case of a real property, insurance policies covering commercial general liability and environmental are just two of the many examples. And by all, it should include policies dating as far back as decades. When all these policies at this homepage are already at hand the review should include these important considerations.

For one, check the risks that are being covered by all the policies. Moreover, due diligence review should include checking which companies the seller has bought those insurance policies from and if they are indeed the right policies for the property. The buyer should carefully examine the risks and exposure to loss and there is no exception. The next thing to check is the name insured on the policy, which often times is the seller’s name. In other cases, the seller’s subsidiaries must also be covered. This is something that needs to be checked even if no subsidiaries have been stated. Due diligence review should also include checking if there are other risk transfer agreements that the seller should be obliged to fulfill. This is important when there are claims to be made.

Moving on, the buyer should also take note if there are any deductibles on the policy or whether or not there should be retained after the transaction. It should be noted that in most cases, the buyer should not be held responsible for those deductibles or retention after the sale if the seller has already shouldered such portion, even just a portion of that.

There are many more considerations and these things may be complicated or confusing. But due diligence and risk management is part of the expertise of Nicolas Giannakopoulos. Learn more at this website. Visit http://www.unige.ch/formcont/crimeorganise-site/programme/cv/nicolasgiannakopoulos/ for more expert information.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s