Due diligence risk factors are the main factors which is a part of conducting a business due diligence exam. This process can be beneficial to a broad range of stakeholders, including acquisition firms seeking to assess the potential target company prior to a merger or acquisition; investors who want an exhaustive assessment of risk prior investing; and potential employees who are evaluating potential candidates for employment.
Due diligence may include different types of checks depending on the goal and scope. The checks include identity verification, screening of sanctions lists, criminal watchlists as well as an investigation into the funds’ source. A risk-based approach is necessary to determine if increased due diligence (EDD), or other measures, are needed. This is because customers who pose greater risk of laundering or terrorist financing require additional measures, including an increased surveillance of transactions and the gathering of more data.
EDD can also involve analyzing the beneficial ownership of corporate customers to limit risks associated with concealed ownership. This could involve examining the structure of the company and identifying connections with public officials that could lead to bribery. EDD should also be able to conduct regular reviews and updating of the sanctions lists for international countries to ensure compliance.
An effective due diligence process must provide a concise overview of key findings to those who don’t have the time to read the full report. The summary should be brief and include the type of business due diligence performed (e.g. the complete risk assessment prior to investing in the company); the reason for the due diligence; and any important findings from the due diligence.