Robust due diligence and monitoring tools help mitigate supply chain and third-party risk. See what to look for in this valuable checklist from LexisNexis.

Third Party Risk Mitigation Checklist: 5 Key Questions For Enhanced Due Diligence

Is it time to upgrade your due diligence software solution?


Q: Are you frustrated with open web searches that lead to paywalls, dead-ends, irrelevant or out-of-date information?

A: 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 and 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.

Q: Do you spend too much time filtering results sets to find relevant, negative news mentions needed for due diligence reports?

A: Look for a tool that includes powerful negative news filtering and highlights words that triggered the hit 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, to more accurately identify individual or entity names associated with derogatory words related to the risks you face, such as bankruptcy, bribery, corrupt, forced labor, fraud, and others.  

Q: Do you have access to pertinent corporate hierarchy data to improve visibility into beneficial ownership for due diligence investigations?

A: Disclosures about the Panama Papers inspired TRACE International to start a public, global beneficial ownership register, however TRACEpublic depends on companies to voluntarily disclose those details. Unfortunately, if an organization wants to keep ownership details hidden, it can. Look for a tool that includes company family data—including ultimate parent, subsidiaries, joint ventures, affiliates, divisions, branches, groups, holdings and shell companies—to help you spot the signs of beneficial ownership.

Q: Does your current due diligence software solution allow local users to work in their language of choice?

A: If your company has operations in multiple countries, you need tools that adapt to the needs of local users. Why? Because time after time, 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 across the globe, you help to drive usage, which in turn, helps to mitigate risk more effectively.

Q: Can you automatically capture a comprehensive audit trail of your due diligence investigations to help address regulator expectations?

A: 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.

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, watch lists and PEPs; 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. Learn more about steps to take when developing a due diligence strategy.

Next Steps

  1. Download our Buyer’s Guide to learn how Nexis Diligence brings together a comprehensive array of information—all in one place—to help you save time on due diligence investigations and reporting.
  2. Try it yourself. Fill out the form to the right to arrange a free 7-day trial of Nexis Diligence.

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