Glossary - Operational Due Diligence
Operational Due Diligence refers to the comprehensive evaluation and analysis of a company's business operations. This process involves assessing the effectiveness and efficiency of the company's operations, including its systems, processes, and management. The aim is to identify potential operational risks and areas for improvement, ensuring that the company can achieve its strategic goals effectively.
Also known as
- Operational Assessment
- Operational Review
Use cases examples
- Investment Memo: The Operational Due Diligence section of the investment memo highlights the company's robust supply chain management processes and identifies areas for operational improvements post-investment.
- Acquisition Proposal: In the acquisition proposal, Operational Due Diligence findings revealed discrepancies in the target company's reported inventory levels, prompting further negotiations to adjust the purchase price.
Considerations for investors
- Investors should assess how operational efficiencies or deficiencies impact the long-term value and scalability of the investment.
- Due diligence should include an evaluation of the target company’s adaptability to changes in the market or operational disruptions.
Considerations for founders
- Founders should be prepared to provide comprehensive information about their operational processes, including details about suppliers, production capabilities, and quality control measures.
- Being transparent and forthcoming about any known operational issues can build trust with potential investors and partners, potentially leading to more favorable terms.
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