What To Look For In a Due Diligence Tool

At the 2020 World Economic Forum, Kevin Hewitt, Chairman of the EMEA region of FTI Consulting, shared survey results of 2,200 executives from private and publicly traded companies across all G-20 countries. The topic? Risk and resilience.

In what now feels like a moment of second sight, Hewitt commented, “It is not a matter of if a company will face an inflection point or crisis, but when it will happen—meaning the senior executives and businesses that are most prepared are likely to remain the most resilient, competitive and viable.”  A few short weeks later, the World Health Organization declared COVID-19 a global public health emergency; by March it was declared a pandemic.

As we're now three years out from that declaration, many organizations are still re-evaluating their approach to risk management with an eye toward greater resilience in the face of increased regulatory, reputational, financial and strategic risk. Unfortunately, many companies still haven't found a good, all-in-one solution--leading risk management professionals at a loss when trying to compile data to do their necessary due diligence. 

The best tool compiles all the data you need with top-notch technologies to make sure you have what you need ongoing risk monitoring. In this article, we go over problems in due diligence, what you need in a due diligence tool and how Nexis Diligence+ has the answer, helping you plan for the future and mitigate risk. 

Enable efficient, comprehensive due diligence—all in one place

Holistic risk management helps companies identify potential threats on the horizon. It’s exactly what companies need to respond proactively to the shifting risk landscape—be it the introduction of new regulatory requirements around beneficial ownership financial instability of key supplier, or some other disruptive event. Here's what you should consider:  

Access to up-to-date data without paywalls 

Look for a tool that aggregates content from sources that are highly relevant to due diligence research, including premium global news unavailable on the open web, multiple sources of watch lists, sanctions and more.

Using the open web to find a nearby restaurant makes sense, but when it comes to due diligence, the open web offers less value. Search engine optimization means that relevant information is often obscured by marketing content that uses keywords to boost page rank. Consequently, you miss out on critical intelligence because it is buried deep in the search results. 

In addition, it can be difficult or costly to find critical legal and public records data*, such as out-of-court settlements, judgments, liens or bankruptcies—to manage financial risk exposure within your supply chain or among customers, partners and other third parties.  Moreover, open web content is vulnerable to a host of issues—from ‘Right to Forget’ laws that hide negative press to conflicting information that requires additional time to ascertain which source offers the greatest accuracy.

Ultimately, you need to work efficiently when it comes to conducting due diligence, and open web research hampers your efforts when you must take extra steps to vet findings or filter out irrelevant results from crucial negative news mentions.

Filtering results to find relevant, negative news mentions needed 

Look for a tool that includes powerful negative news filtering and highlights your key words to help you rapidly assess risk potential. Regulators recommend the inclusion of adverse news searches as part of a complete due-diligence program. To ensure the best results, you need a source that includes archival content—something you can’t find on the open web—so you can identify ongoing patterns of negative news that could signal a potential risk.

The globalization of supply chains and third-party networks means you also need the ability to search for adverse news across multiple languages. This will give you the ability more accurately find individual or entity names associated with derogatory words related to the risks you face, such as bankruptcy, bribery, corrupt, forced labor, fraud, and others. 

Access to beneficial ownership data for due diligence investigations

The recently passed Corporate Transparency Act (CTA) requires all U.S. businesses to file “beneficial ownership” information, and it’s just one of several global regulations that aim to reign in the use of beneficial ownership to hide financial crimes and corruption.

Look for a tool that includes beneficial ownership data, complemented by corporate hierarchy information—ultimate parent, subsidiaries, joint ventures, affiliates, divisions, branches, groups, holdings and shell companies—to help you identify beneficial owners and other relationships that could pose a risk.

Allow local users to work in their language of choice

If your company has operations in multiple countries, you need tools that adapt to the needs of local users. Companies have learned the hard way that technology adoption rates decline when the tools are not intuitive and easy to use.

By selecting a due diligence tool that offers multiple language interfaces and alert-scheduling options that suit local users, you help to drive usage, which in turn, helps to mitigate risk more effectively.

Automatically capture a trail of your due diligence investigations 

Look for a tool with a built-in due diligence Report Builder that allows you to create custom reports for compliance audits.

The U.S. Department of Justice and the Enforcement Division of the Securities and Exchange Commission indicate in A Resource Guide to the U.S. Foreign Corrupt Practices Act that “… the degree of appropriate due diligence may vary based on industry, country, size and nature of the transaction, and historical relationship with the third-party,” but the guidance goes on to suggest that both agencies will consider whether a company has undertaken appropriate, risk-based due diligence of its suppliers and third parties to mitigate compliance risk. An in-depth, detailed report can help companies establish their intent to comply with FCPA requirements.

MORE: Key trends in risk and compliance

Bridge gaps in your third party due diligence

While some industries, like financial services or pharmaceuticals, face elevated risk due to the regulatory landscape, no industry is immune.

As we’ve seen in the past, an unforeseen problem—whether due to a defective part, a work stoppage or the discovery of unethical conduct somewhere along the supply chain—can lead to angry customers that share their frustrations on social media, negatively impacting a company’s reputation and bottom line.

To mitigate risk, companies need fast, convenient access to the news; company, country and industry information; regulatory and legal data; sanctions, watchlists, PEPs and SOEs; and public records you need to conduct third-party due diligence. You also need a due diligence strategy that includes proactive risk assessments, enhanced due diligence when warranted and on-going monitoring.

See how the enhanced data and intelligent technologies in Nexis Diligence™ enables fast, efficient due diligence. Arrange a personalized demo today!

*Access to U.S. Public Records content is subject to credentialing. Due to the nature of the origin of public record information, the public records and commercially available data sources used in reports may contain errors.

The LexisNexis Public Records services are not provided by “consumer reporting agencies,” as that term is defined in the Fair Credit Reporting Act (15 U.S.C. §, et seq.) (“FCRA”) and do not constitute “consumer reports,” as that term is defined in the FCRA. Accordingly, these LexisNexis services may not be used in whole or in part as a factor in determining eligibility for credit, insurance, employment, or another eligibility purpose in connection with which a consumer report may be used under the FCRA.