Due Diligence

Meaning & Definition 

Due diligence is the process of collecting and verifying information for a company or employee through evaluating the company’s records, employee records, the company’s policies, compliance status, and potential risks to the company’s workforce relative to mergers and acquisitions, audits, hiring new employees, or onboarding vendors. 

Importance in HR & Organizational Risk Management

• Recognizes risks related to the workforce, legal and financial earlier.
• Ensures compliance with HR Regulations and Labour Laws.
• Supports decision-making during hiring and mergers through data and information sharing.
• Helps protect organizations from disputes and liabilities in the future.
• Enhances organizations transparency and practices of governance.

Applicable Regulations & Policies

Which laws are applicable will depend on the transaction and the organization making the transaction.

The Companies Act of 2013 requires due diligence in assessing acquisitions, mergers, and corporate restructurings. 

The Digital Personal Data Protection Act 2023, which regulates the handling of employee and candidate data for human resources due diligence assessment, is another law that must be reviewed when conducting human resources due diligence.