Due diligence (DD) is closely related to DYOR. It encompasses the thorough investigation and careful consideration that rational individuals or businesses are expected to undertake before entering into agreements with other parties.
When rational business entities engage in agreements, it is customary for them to conduct their due diligence on one another. Why is this important? Simply put, any rational actor aims to identify and address potential issues or red flags associated with the deal. After all, how else could they accurately assess the potential risks against the anticipated benefits?
The same principle applies to investments. When investors are on the lookout for potential investment opportunities, they must perform their own due diligence on the project in question. This ensures that they can comprehensively evaluate all potential risks and make informed investment decisions. Without such diligence, they might find themselves lacking control over their investments, potentially leading to poor choices.
