Due Diligence Risk Factors

Due diligence is a procedure that helps businesses make informed choices and reduce risk. It addresses financial, commercial and legal issues. Due diligence risk factors can include a company’s concentration on customers or the existence of regulatory or legal disputes and the degree to which a business has created intellectual property.

Fact verification is an essential aspect of due diligence. It is a process of analyzing information thoroughly to ensure it is true and authentic. This includes reviewing documents, cross-checking information and verifying the identity of individuals.

An organization should regularly update its due diligence on its ongoing activities, projects and https://getvdrtips.net/how-does-an-organized-data-room-index-contribute-to-effective-document-structuring-and-accessibility-within-virtual-data-rooms/ business partners. The frequency of these updates varies on the risk level of the country, project or business associate. In high-risk areas it is possible to review due diligence at least every two years.

Enhanced due diligence (EDD) goes beyond the standard CDD and checks for red flags such as the presence of politically exposed persons (PEPs) or an antecedent of money laundering and corruption. This could involve screening against lists of PEPs compiled by law enforcement agencies such as the U.S. Federal Bureau of Investigation and the UK National Crime Agency.

EDD involves determining the the scope of relationships and any involvement of third parties. For example the supplier that has a relationship with clients in a particular area would need to undergo a more thorough screening than an employee of the client’s business. Companies should also review regularly their own due diligence results and respond if they discover that there are any new or greater risks.