In a worse-case scenario, failing to conduct adequate due diligence can destroy your business and leave you personally open to follow-on lawsuits.
Specific issues include:
Reputational Damage: If issues emerge about your partner’s dealings or the behaviour of figureheads within the business, this can leave you at risk of significant harm to your personal image. This can involve embezzlement, poor behaviour, or corruption – leaving you tarred with the same brush and struggling to take corrective action.
Economic Costs: Failing to judge the value of a deal or agreement can come at significant financial cost. If a partner mis-represents the value of their product or service, this can leave you shouldering the burden of investment. This can also leave you open to formal legal action, civil suits, and more.
Sustained Risk: If you have business relationships already in place, this can leave you open to issues further down the road. These can range from illegal business practices, poor press, or inadequate management that cripples their product or unique selling point. This can result in being fined or inquests if you were deemed to directly profit from their actions.
Legal Issues: Failure to conduct adequate due diligence leaves you open to legal charges. Ensuring that you are fully compliant within the letter of the law is essential.