24 hours ago3 min read

The Importance of Due Diligence

Facilities management (FM) is a complex and dynamic industry that requires careful planning and attention to detail. Whether you're setting up suppliers for a new facility or reviewing your current contracts, due diligence is essential for maintaining smooth operations and fostering strong supplier relationships.

Without proper due diligence, you risk poor service quality, higher costs, and even legal or regulatory issues. Let’s explore why due diligence is critical in facilities management and how you can implement it to protect your business.

Why Does Due Diligence Matter in Facilities Management?

The due diligence involves gathering and analysing information about potential suppliers to assess their reliability, stability, and capabilities. When selecting suppliers for facilities management contracts, it’s crucial for several reasons:

1. Quality Assurance

Your suppliers are key to the success of your operations. Verifying their experience, certifications, and qualifications ensures they can meet your service standards. Without this step, you risk hiring underperforming suppliers that could disrupt operations or harm your reputation.

2. Risk Management

Facilities management involves numerous risks—from financial instability to safety issues. By conducting thorough due diligence, you can identify and mitigate potential risks. This helps ensure you select suppliers with a solid track record and reduces the likelihood of operational disruptions.

3. Compliance

FM contracts are subject to a wide range of regulations, including health and safety, labour laws, and environmental standards. Proper due diligence helps ensure your suppliers comply with these regulations, protecting you from potential fines, lawsuits, or reputational damage.

4. Cost Control

Supplier-related issues—like late deliveries, poor service, or financial instability—can lead to unexpected costs. By choosing suppliers based on a thorough evaluation process, you’ll reduce the likelihood of hidden costs and better manage your budget.

The Risks of Neglecting Due Diligence in Facilities Management

Skipping due diligence can have far-reaching consequences that affect both your bottom line and your reputation. Here are some of the risks associated with poor supplier selection:

Poor Service Quality: A supplier that can’t meet your expectations leads to operational inefficiency and dissatisfied clients.
Financial Instability: A supplier going bankrupt or failing to deliver as promised can result in costly disruptions.
Regulatory Violations: Suppliers who fail to adhere to regulations can leave you exposed to legal trouble, fines, and reputational damage.
Hidden Costs: Inadequate suppliers may require more resources to fix problems, driving up your costs and eroding profitability.
Safety & Security Issues: Non-compliant or unsafe suppliers pose risks to your operations and can result in serious legal liabilities.

Did You Know?

53% of organisations experienced data breaches caused by third-party vendors.
58% of companies experienced supplier-related disruptions in the last two years, with 10% reporting a significant impact.
Despite the risks, only 44% of organisations have a formal due diligence program in place to assess suppliers.

Do You Carry Out Proper Due Diligence?

Here are five questions that can be used to assess whether your company carries out proper due diligence when selecting suppliers for facilities management contracts:

How do you gather information about potential suppliers?
What criteria do you use to evaluate suppliers?
How do you ensure suppliers comply with regulations and standards?
How do you manage supplier relationships?
How do you assess and mitigate risks associated with suppliers?

The Risks of Neglecting Due Diligence

Failing to conduct due diligence in selecting suppliers can lead to:

Poor Service Quality: 58% of companies faced supplier disruptions (Accenture).
Financial Instability: 53% experienced data breaches from third-party vendors (Ponemon Institute).
Regulatory Issues: 69% faced legal or compliance challenges (EY).
Reputational Damage: 28% suffered from supplier-related reputation harm (Deloitte).
Safety & Security Problems: 43% dealt with security disruptions (Supply Chain Dive).
Legal Disputes: 85% had contract disputes (IACCM).
Insurance Gaps: 54% faced disruptions due to inadequate coverage (Marsh).
Poor Communication: 25% experienced delays (Deloitte).
Hidden Costs: Supplier issues caused cost overruns up to 20% (Aberdeen Group).

About MCFM Global Academy

MCFM Global Academy envisions a world where FM mobilisation challenges are met with unparalleled expertise. Our mission extends beyond creating Mobilisation Masters; it's about ushering in an era where these masters lead the FM industry toward a trajectory of robust growth, innovative solutions, and a deep-rooted culture of sustainability and global impact - visit us at 👉 https://mcfmgacademy.com/

🎧 Listen to the Podcast - The Importance of Due Diligence by Maxcene Crowe