Due Diligence Risk Factors

Due diligence factors are the main issues that go into the risk assessment process when conducting a due diligence examination. A variety of parties can benefit from the process, including firms looking to assess their potential partner prior to an acquisition or merger as well as investors seeking an extensive risk assessment prior investing; and employees who are evaluating possible candidates for employment.

Due diligence may include different types of checks according to the purpose and scope of the process. Checks include identity verification, screening of sanctions lists, criminal watchlists, as well as an investigation into the funds sources. A risk-based approach is needed to determine whether enhanced due diligence (EDD) or other measures, are needed. This is because clients who are at a higher risk of money laundering or terrorist financing need additional measures, such as an increased surveillance of transactions and the gathering of more data.

EDD could include evaluating the beneficial ownership of corporate clients in order to limit the risk associated with concealed ownership. The process could also involve looking at the structure of the company’s activities and identifying any affiliations with public officials that could lead to bribery or other corruption offences. EDD must also conduct a regular review and update of the list of sanctions to ensure compliance.

A successful due diligence process should provide a clear summary of the key findings for those who don’t have the time to read an entire website link report. The summary should be concise and should contain the kind of business due diligence that was conducted (e.g. the complete risk assessment prior to investing in an organization) and the purpose behind the due diligence; and any significant results from the due diligence.

Tags: No tags

Leave a Comment