The Role of Due Diligence in Project Management

Abstract

Uncertainty is an inevitable part of any given project and project managers employ a variety of tools and techniques to assess and manage the potential risks that might occur throughout the project ‘s lifecycle. A method that is frequently used is due diligence, often called project due diligence, which typically consists of a cost estimation, review of available data, risk analysis and a comprehensive assessment of the project. The assessment helps organizations to identify and potentially mitigate the risks and uncertainties related to the project. The main purpose of due diligence is to acquire available information about a project and assess if the project is feasible and the potential impacts it can have in the future.

The purpose of the article is mainly to evaluate the importance and value of due diligence in project management. Due diligence is a crucial component of project planning and the decision-making process for a specific project, where it aids in project managers’ decision-making. This article will not only give the reader an insight of the purpose and importance of due diligence but more importantly an understanding of the process. A guidance will be provided for the various steps and best practices for the common due diligence techniques, which will help in applying due diligence in different project contexts.

Furthermore, this article provides an insight to the limitations and challenges associated with due diligence in project management. The method will be evaluated based on the potential benefits such as improving project outcomes by lowering risk and improving project planning and decision-making, as well as its potential challenges, such as lack of sufficient or reliable data and significant investment costs.

The Big Idea: An Introduction

Although due diligence is not a new concept, project due diligence is relatively new and has grown in significance over time. It is a term describing the process of evaluating a company, an investment, or a project. Project due diligence is not a legal obligation, it is a voluntary management tool that is part of a responsible risk management strategy. When it comes to project management it is of great importance to have a project scope for a given project to ensure that the project is properly planned, carried out and ultimately achieves its intended goals. It involves conducting a comprehensive analysis of the upcoming project to identify potential risks and challenges that may impact its success. However, conducting a due diligence is about reducing the uncertainty rather than to eliminate it. Project failures are often the result of the lack of a proper due diligence.

When the scope of the project has been established the project objectives are defined. It depends on the specific context of a given project what the project objectives will be. It is important to first identify the forces of uncertainty and where the uncertainty is coming from before the risk landscape can be effectively organized. To properly manage the risk, project due diligence must be incorporated into management and planning procedures.

References

Quality Control and Due Diligence in Project Management: Getting Decisions Right by Taking the Outside View, 5th edition (2012)

Construction Due Diligence in Different Project Delivery Systems, 1st edition (2012)

Experiences with wind farm project risk management: Due Diligence and Project Certification, 5th edition (2009)