Due diligence assessment of non-financial risk: Prophylaxis for the purchaser

Most large mining companies grow by acquisition and conduct due diligence assessments in order to identify the opportunities and risks associated with potential acquisitions.Due diligence assessment is usually restricted to considering the financial aspects of an asset, and often overlooks the non-financial risks that may compromise the economic viability or operability of a project. However, experience has shown that neglecting non-financial risk areas such as environmental, socio-economic and sustainability performance may be problematic and, under extreme circumstances, potentially disastrous, particularly in a developing world context.This paper examines the due diligence process and identifies the limitations of conventional assessments based solely on financial risk. It presents practical recommendations on structuring due diligence assessments to consider non-financial risk so that the full risk profile of an asset can be identified.