What Does Vetting Mean and How Is It Done
Vetting is the process of investigating an individual, company, or entity before proceeding with a joint project. It involves background review and due diligence to ensure informed and worthwhile decisions are made.
Managers, investors, and analysts vet potential investments by closely examining financial records, key personnel, and growth potential. Once fully vetted, the investment or deal can proceed.
Key Takeaways:
– Vetting involves applying criteria to distinguish better options from worse ones.
– It begins with a background review to investigate the skills and experience claimed by a job candidate.
– Due diligence is used to vet potential investments.
Understanding Vetting:
The verb "to vet" originated from British slang and refers to the thorough examination of a horse or patient. In modern business, vetting means examining a person or company for soundness and integrity.
Examples of Vetting:
Companies vet candidates for management positions, while businesses vet potential suppliers. Investment advisers vet investments based on track records, management quality, and growth potential. Vetting is also used in various situations outside finance, such as refugee applications, government security clearances, and contract review.
Vetting Process:
The process includes confirming and verifying information, conducting credit and criminal background checks, and interviewing associates.
The High Cost of Vetting:
Though vital, vetting can be time-consuming and expensive. Therefore, a balance must be struck between costs and benefits. The US government launched "Trusted Workforce 2.0" to reform its personnel vetting system and reduce delays and costs.
Note:
Some brokerages provide pre-vetted investment lists for clients.
How to Vet an Investment:
Vetting, also known as due diligence, involves collecting data, reviewing financial records, and considering past performance. It reduces risk exposure and ensures informed decisions.
What Is a Vetted Credit Check?
A credit check assesses the creditworthiness of a potential borrower by analyzing factors like income, assets, job security, and existing debts.
What Does Vetted Mean in Immigration?
New entrants to a country or citizenship applicants undergo vetting to assess their suitability. This process examines criminal activity, debts, employment prospects, family status, and health.
What Does Fully Vetted Mean?
Fully vetted implies a comprehensive analysis and an objective decision.
What Does Vetted Mean in Politics?
Political candidates and appointees are vetted to ensure relevant skills and to uncover any potential issues.
The Bottom Line:
Vetting allows individuals and companies to make informed decisions based on critical evaluations. It involves interviews, research, and database checks to obtain a full picture of details before making a decision.
