What does 'due diligence' entail in contract management?

In the context of contract management, 'due diligence' primarily involves conducting a thorough investigation and assessment of potential risks associated with a contract prior to its execution. This process is crucial for identifying any potential issues that could affect the project's success or lead to financial or legal repercussions.

By engaging in due diligence, a party can evaluate factors such as the reliability of the other party, compliance with relevant regulations, and any possible liabilities that may arise during the term of the contract. It encompasses a comprehensive review of all relevant information and documentation to ensure that the decision to enter into a contract is well-informed.

The other options, while relevant to different aspects of contract management, do not capture the essence of due diligence. Reviewing contract terms after signing involves ensuring compliance with agreed-upon conditions, which happens post-signature. Creating performance metrics is about establishing benchmarks for evaluating a project's success, rather than assessing risks before entering into a contract. Evaluating financial statements is typically part of the overall risk assessment process but does not encompass the full scope of due diligence. Therefore, the correct answer focuses on the proactive risk assessment that defines the due diligence process in contract management.