Due Diligence Risk Factors

Due diligence risk factors are the primary concerns behind the risk assessment that goes into the process of conducting a business due diligence examination. A wide variety of stakeholders can benefit from the process, such as companies that wish to look at their potential target prior to an acquisition or merger and investors who want a thorough risk assessment before investing; and employees evaluating potential employment candidates.

Due diligence can involve a variety of checks, according to the purpose and scope of the process. The checks include identity verification, screening of sanctions lists and criminal watchlists, as well as an investigation into the funds the source. Additionally an approach based on risk must be employed to determine if enhanced due diligence (EDD) measures should be implemented. Customers who are at greater risk of the financing of terrorists and money laundering will require additional measures such as the monitoring of transactions patterns and gathering more details.

EDD can involve analyzing beneficial ownership of corporate clients to mitigate the risks of hiding ownership. The process may also involve studying the structure of a company’s activities and identifying any possible relationships with public officials which could lead to bribery and other corruption offenses. EDD should also include a regular review and updating of international sanctions lists in order to ensure compliance.

A thorough due diligence process will provide a summary of principal findings to those who aren’t able to read the full report. The summary should be brief and include the kind of due diligence completed (e.g. an exhaustive risk analysis prior to investing in a business) as well as the rationale behind the diligence, and any important results.

http://www.getvdrtips.net/angel-investor-due-diligence-checklist