When you are running a company your first duty is to your company. Every decision you make should be able to make the company stronger. Only if you behave like that will everyone who works there and everyone who uses what goods or services you provide will be happy and safe.
Therefore, every time you start doing business with a company or an individual you have to get into that business after you have properly identified who they are. You should use KYC or Know Your Customer process to have an idea who they really are. If you do not, you will have to face a number of risks if they are not a clean company or a clean individual.
Having to Get Involved in Legal Problems
Legal problems have the power to destroy a company. If you start doing business with another firm or an individual without checking their legal past and they do have some legal problems, once you start doing business with them their legal problems could affect your business too. For example, if you choose them as a supplier and suddenly due to some legal trouble they have to shut down their operations you will have to find a supplier in a hurry. If you are unable to find a new supplier your business is going to be affected without being able to continue production.
Having to Face Financial Problems
Getting a KYC report provided by a reliable firm offers you the chance to see if a company or an individual is caught up with any financial problems. This is especially necessary if you are going to give them a loan or some kind of a mortgage. If you offer them that financial aid without checking their financial situation and they do not pay your money back, you will have to face financial problems as a company.
Getting Your Company Name Tarnished
There are certain individuals or companies which are bad for business as their form of business or behaviour have gained them a bad name in the industry. You can be unaware of this fact. That is why you should investigate them before getting into business with them. However, if you do not investigate them, you could end up partnering with them and getting your company name tarnished too because of your connection to them.
All of such risks can be avoided by running a proper check about who you are going to do business with before you start doing business with them. There are professionals who are good at such work.