FAQ.- What is the meaning of risk-based due diligence?

Risk-based due diligence means that companies prioritize their actions based on the severity and likelihood of adverse impacts. If a company cannot address all potential risks at once, it can focus on the most serious and probable ones first. At the same time, they are required to take appropriate measures to identify and address these impacts.

“Appropriate measures” refer to actions that are capable of effectively dealing with the identified impacts, taking into consideration their severity, the company’s resources, and the specific circumstances.

Companies must map their own operations, those of their subsidiaries, and their business partners to identify areas where negative impacts are most likely and severe. Based on this, they conduct a detailed assessment of these high-risk areas. If all impacts can’t be tackled at once, companies are expected to prioritize them by focusing on the most severe and likely risks first.