Due Diligence When Renewing A Third Party Relationship

by Michael Volkov
Contact

duediligence renewalHappily married couples like to renew their wedding vows.  It is a great celebration of love.  When you meet the spouse of your dreams, it is a wonderful ceremony.  I look forward to such an event with my wonderful wife, Rosetta.

Things may not be so smooth when it comes to a company renewing its relationship with a third party.  Hopefully, it will be a smooth review and renewal process.

Companies need to include a renewal process in its due diligence program.  Luckily, the company has a lot more information to evaluate the third party and the risks of corruption.  There is a track record of performance and compliance.

The due diligence process has to be modified to reflect this track record.  If the company  had a long relationship with the third party (over ten years) without any blemishes, a due diligence review will be less onerous than the renewal of a third party after an initial three-year term.

As always, due diligence begins with the collection of information.  The first source is always within the company.  The sponsor of the third party should provide information about the relationship, how it has been operating and the identification of any problems.  The sponsor should complete a questionnaire.

Similarly, the third party should be required to complete a questionnaire, which needs to be tailored to the individual circumstances.  If there has been a long-standing relationship, the questionnaire should reflect this reality.duediligence4

It is always important to confirm ownership of a third party and the absence of relationships with current and former foreign government officials.  This inquiry is always required no matter what the relationship between the third party and the company.

The due diligence process should include a review and evaluation of internal controls.  The internal auditors and controller should be consulted to ensure that third parties are complying with invoicing requirements and payment arrangements.  If additional certifications or representations are needed, they should be requested from the third party.

The internal auditors need to provide any results of any audits of the third party books.  If anything unusual has been identified, or if the third party resisted the audit, these issues need to be resolved before renewal of the contract with the third party.

If there is any fresh information about possible corruption allegations involving the third party or anyone associated with a third party, these need to be examined as well.

It is a good practice to interview the key owner of a third party representative before renewing your vows.  Past performance is not an absolute guarantee of future performance, depending on the length of the relationship with the third party.

duediligence2It never hurts to conduct an interview and only helps to ensure that going forward is based on a fair and objective view of the relationship and relevant risks.

Just to be clear, I am not advocating a due diligence renewal for happily married couples seeking to renew their vows.  After all, when it comes to matters of love, the heart always can tell you the truth.  That same principle does not apply when it comes to matters of business.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Michael Volkov, The Volkov Law Group | Attorney Advertising

Written by:

Michael Volkov
Contact
more
less

The Volkov Law Group on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.