Due Diligence Risk Factors

Due diligence risk factors are the underlying aspects of the risk assessment that forms the basis of conducting a due diligence exam. The process can be beneficial to a range of stakeholders, including acquisition companies seeking to examine their potential buyer prior to a merger or acquisition; investors looking for a thorough evaluation of risk prior to investing; and potential employees assessing possible employment candidates.

Due diligence can involve a number of different checks, based on the intended purpose and the scope. The most common checks www.getvdrtips.net/angel-investor-due-diligence-checklist/ are identity verification, screening against sanctions lists and criminal watchlists, as well as an investigation into the origin of the funds. A risk-based approach is required to determine if enhanced due diligence (EDD) or other measures, are needed. Customers who are at a higher-risk of the financing of terrorists and money laundering will require additional measures, including more frequent monitoring of transaction patterns and gathering more data.

EDD can also include assessing the beneficial ownership of corporate clients to minimize the risk of hidden ownership. The process could also involve looking at the structure of the company’s business activities and identifying any possible relationships with public officials that may result in bribery or other corruption offenses. In addition, it’s essential that EDD includes a regular review of the sanctions lists for international countries to ensure compliance with regulations.

A well-run due diligence program will provide a concise summary of the main findings for those who do not have the time to read the full report. The summary should be concise and include the type of business due diligence conducted (e.g. an extensive risk assessment prior to investing in the company); the reason for the due diligence; and any important results of the due diligence.