As companies grow and expand their digital landscapes, their reliance on outside partners – vendors, suppliers, agents, and contractors—has escalated many fold. So too has their risk.
In 2025, your greatest security or compliance violation might not be from within—perhaps it will originate from an unvetted third-party partner.
Read More: Securing Vendor Partnerships
What Is Third-Party Due Diligence?
Third-party due diligence (TPDD) is a systematic exercise in evaluating, validating, and tracking outside parties with which the company transacts business, be it supply chain, lending, franchisee, or services delivery.
It provides answers to queries such as:
Is the third party compliant with the law?
Do they have undisclosed litigation or financial warning signs?
Are they trustworthy enough to entrust your money, information, or reputation to?
Are they genuine, registered, and in business?
When executed correctly, TPDD enhances resilience, improves compliance, and fosters long-term business relationships.
Speed vs. Risk Conundrum
Digital-native organizations, particularly fintech, e-commerce, healthcare, and logistics firms, commonly onboard hundreds of suppliers every month. However, such velocity creates blind spots:
Inconsistent or manual verification
Paperwork-induced onboarding delays
Too much reliance on human discretion
Risk of fraud, shell companies, and compliance failures
As per ItPro, 62% of companies experienced a data breach in 2023 because of weaknesses in third-party software supply chains.
A Contemporary TPDD Framework Addresses 6 Risk Layers
Successful due diligence in 2025 must address multiple dimensions. Here’s how thorough TPDD appears:
1. Operational Risk
Business and operational nature
Reach and locality
Verification of premises
2. Management Risk
Director profiles
Fraud or litigations history
Sanctions and worldwide watchlists
3. Financial Health
GST filings, verification of bank accounts
MCA ratios, shareholding trends
Insolvency or default history
4. Legal & Reputational Risk
Civil or criminal case records
Negative media hits
Brand damage potential
5. Compliance Risk
PAN, GSTIN, Udyam, PF, ESIC checks
Regulatory adherence
Sectoral compliance frameworks
6. Physical Site Verification
GPS-tagged field checks
Photographic evidence
Agent feedback and validation
This 360-degree model prevents future risks—whether financial, legal, or reputational.
Data Points That Shouldn’t Be Ignored
A 2024 EY report points out some disturbing facts:
49% of organizations don’t have uniform third-party monitoring practices
80% of them had a third-party-related incident
Global enforcement action for third-party-related fraud increased 34% year-over-year
How OnGrid Powers Intelligent TPDD at Scale
OnGrid provides a digital-first, API-based TPDD platform designed to manage sophisticated and high-volume onboarding cases.
Key Features:
PAN, GSTIN, Udyam, CIN, Shop Act verifications
MCA deep-dives (financials, shareholding, directors)
Sanctions, PEP, and litigation screening
Adverse media and reputation tracking
KYC / KYB checks with government databases
Field verification with GPS, photos, and agent inputs
Batch imports and real-time integrations through secure APIs
OnGrid’s platform is SOC 2 Type II, ISO 27001, and ISO 27701 certified to ensure complete data security, privacy, and audit readiness.
Where It Applies: Industry Use Cases
Why Due Diligence Must Be Ongoing, Not Singular
Regulatory, financial, and operating environments evolve continuously. It is no longer sufficient to depend on a single check.
Directors step down or are removed
Firms change operations or names
Financial stability can shift quarterly
Regulatory regulations change
Monitoring in real-time is the future of third-party risk management.
FAQs: All You Want to Know About TPDD
Q1: Who should conduct third-party due diligence?
Any company dealing with vendors, suppliers, franchisees, financial agents, or logistics partners, particularly in regulated industries such as finance, pharma, insurance, and lending.
Q2: How is TPDD distinct from KYC or KYB?
KYC/KYB is identity-level vetting. TPDD is more comprehensive—verifying operations, legal status, finances, physical presence, and reputation.
Q3: How frequently should third-party checks be conducted?
TPDD must be conducted at onboarding and reassessed from time to time (every 6-12 months) based on the risk profile.
Q4: Is TPDD mandatory in India?
Yes, TPDD is more and more mentioned in:
RBI KYC Master Direction for NBFCs and Banks
Prevention of Money Laundering Act (PMLA)
DPDP Act, 2023
SEBI and IRDAI guidelines for intermediaries
Failure to exercise due diligence can lead to severe fines and reputational loss.
Q5: Can startups leverage TPDD?
Absolutely. Even small firms require the guarantees that suppliers or technology partners are not exposing them to undisclosed risk—particularly when growing quickly or handling sensitive information.
Want to see TPDD in action? Schedule your walkthrough today.
Sources:
Leave a Reply