Significance of due diligence services to business risk reduction

Reducing acquisition and merger risk To better understand the situation of shareholders and assets of enterprises to be acquired and merged can lower acquisition and merger risk for a financer to some extent. Company acquisition is an awfully risky investment activity, so the acquiring enterprise must clearly know Subject’s situation as much as possible in decision making in order to increase feasibility of acquisition and merger and reduce possible risk and loss. In the practice, the acquiring enterprise usually grasps Subject’s situation via due diligence investigation of professionals.

Evading fraud risk and compliance risk or joint liability Along with constantly intensified banking competition, domestic and overseas financial circles have consecutively launched new products in order to quicken business development and expand customers’ market. Meanwhile, commercial banks also have to face with the challenges of various new risks. One of the biggest risks, with which the global financial circle is confronted, is financial fraud. The main risks of banks in the process of operation management include credit risk, market risk and operation risk. Due to a variety of factors, fraud risk-one of the operation risks has always been ignored. In fraud risk, fraud, misappropriation of assets, and violation of laws and company rules and regulations in which internal personnel participate are the most prominent behaviors, e.g. internal personnel falsely reports cash, and steals or makes internal transaction on employees’ accounts; external fraud includes third party fraud, misappropriation of assets, robbery, forgery, issuing rubber check, and hacker invasion. Due diligence investigation can effectively make an active surveillance and prevent diverse fraud risks, strengthen real-time monitoring on banking operation, implement efficient internal and external control, and help establish a complete risk management system.

Discovering or eliminating bribery related litigation risks Commercial bribery is legally defined as operators’ behaviors of bribing enterprises or individuals with belongings or via other means for the purpose of selling or purchasing commodities. Judging from the definition, the subject and motive of commercial bribery differ from those of other bribery behaviors. The subject of commercial bribery refers in particular to the legal person engaged in profit-making operation activities and its motive is to sell or purchase commodities. This characteristic decides enterprises become the first battle line and top priority of commercial bribery prevention.