Regulations are not set in stone. The rules that govern the way corporations operate will inevitably evolve, affecting not only the inner workings of an organization but also the relationships they have with other companies. Companies understand the importance of going through the due diligence process when working and doing business with third parties, but completing meaningful due diligence and then staying on top of those relationships is often a labor-intensive endeavor.
Evaluating suppliers, vendors, distributors, sales agents, and other third parties for a myriad of risk and compliance issues requires organizations to undertake what can feel like an overwhelming, never-ending cycle of relationship management — one made more difficult by a talent shortage that spans numerous industries. Further complicating the challenge, corporations must also consider compliance on a global scale if the third parties they work with operate in different territories.
The importance of those due diligence assessments cannot be overstated; ignorance is not a defense in failing to properly vet a business relationship. As the volume of these outside relationships continues to grow for many companies, technology is helping both domestic and global organizations and their professionals work through the due diligence process and engage in ongoing monitoring.
The Value of a Powerful Platform
No organization wants to work with another company that can increase the risk of liability, from both a reputational and liability standpoint. But with so many companies and risk areas and related criteria to evaluate, an effective management platform has become a necessity when conducting due diligence. The global nature of business and its sheer scope also present their own challenges during the diligence and screening process. Issues such as determining if a business is on a watchlist or if it is currently in violation of sanctions are complicated and dynamic issues that can change at a moment’s notice.
Information about a company can also come in various forms, including emails, reports, spreadsheets, and other disparate data sources. If data exists in physical form, it may be scattered among different offices as well, creating the need for tracking where it’s stored. Businesses need a system that can aggregate all of this information and make it easily accessible to the compliance and operational teams responsible for assessing it.
Onboarding and Continuous Monitoring
Due diligence is a critical piece of a broader onboarding process at most organizations. Even after going through the initial diligence and vetting process, companies will still need to onboard the companies they’re working with into their financial systems. Due diligence platforms help with these administrative steps by creating a consistent experience and process, establishing a standard for bringing in all new third parties, and gathering disparate information from employees, the third parties themselves, and enhanced due diligence providers.
Risk management, however, is not a one-and-done event that ends with onboarding. Operational circumstances change, and organizations should regularly assess their business affiliations to understand if and how they’ve evolved. For instance, a supplier that cleared the initial vetting stage when they were onboarded two years ago may have since been placed on a watchlist. A good due diligence system can automatically flag these changes for subsequent review by trained researchers who can delve into the alert in greater detail. In addition, even if there are no changes in watchlist status, the financial transactions with the third party may be anomalous or indicative of risk. A robust third-party management approach should also include the use of data analytics on vendor and distributor/customer transactions to detect problematic patterns and transactions in real-time.
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