The Importance of Automated Due Diligence

Automated due diligence is transforming supplier verification, combining speed and precision within the due diligence process to keep your business efficient and compliant. With this powerful, advanced AI technology, you can confidently manage your company’s third-party supplier relationships and reduce potential risks.

Understanding Due Diligence

In business, due diligence involves conducting a comprehensive risk assessment of a potential investment, acquisition, or partnership. This process verifies all relevant information and financial data to identify risks and opportunities.

Types of Due Diligence

There are many types of due diligence, including (but not limited to):

• Insurance: Confirms that third parties have adequate insurance coverage to protect your company from potential liability; encompasses tracking certificates of insurance (COIs) to verify coverage and compliance with legal and contractual obligations.
• Financial: Examines the target company’s financial health, including statements and cash flow, to assess profitability and risks; involves industry benchmarking to compare the target’s performance against competitors.
• Legal: Reviews contracts, intellectual property, and legal compliance to identify risks.
• Operational: Assesses management quality, organizational structure, and supply chain efficiency.
• Reputational: Investigate market perception, customer satisfaction, and brand reputation.
• Regulatory: Reviews the target’s regulatory compliance, as well as that of its suppliers and other related third parties.

These types of due diligence provide a thorough understanding of the target company to help you make informed investment decisions and minimize risks.

The Need for Automation in Due Diligence

Though conducting due diligence manually is possible, using artificial intelligence (AI) to automate the process has many benefits.

Volume and Complexity of Data

The sheer amount and complexity of the data examined in due diligence make manual processing impractical. You must analyze vast amounts of information from various data sources, including financial records, legal documents, and market reports. Automation addresses this challenge by handling large datasets efficiently, reducing the time and effort required to complete due diligence work.

Speed and Efficiency

Timely decisions can significantly impact business outcomes. Automated due diligence systems accelerate the process, enabling companies to make decisions more rapidly. Swift turnaround is particularly beneficial in competitive markets where speed is a crucial advantage.

Accuracy and Consistency

Traditional due diligence is time-consuming and prone to human error. Through AI and machine learning, automated due diligence conducts unbiased, thorough analyses to provide reliable and consistent due diligence reports.

Benefits of Automated Due Diligence

Let’s take a look at some of the advantages when you enhance due diligence with automation.

Time and Cost Savings

Automated due diligence streamlines the evaluation process. This allows you to analyze large volumes of data and reduces the time and resources that comprehensive assessments require.

Risk Mitigation

Automation simplifies identifying and managing potential risks. Advanced algorithms can detect patterns and anomalies that manual reviews might miss.

Compliance

With automated due diligence, complying with regulatory requirements is more manageable. These systems stay up-to-date and consistently apply the latest standards and regulations, producing thorough and accurate compliance checks.

Scalability

Automated due diligence processes can easily scale to accommodate increased data and more complex transactions. This flexibility supports business expansion without compromising the quality or speed of your due diligence efforts.

Key Features of Automated Due Diligence Solutions

Automated due diligence tools offer a range of features that enhance accuracy, efficiency, and reliability in your supplier evaluations.

Contract Compliance Assessment

Your contract is the single most important control in the outsourcing process. A well-written supplier contract is essential to protecting your organization and your customers.

Look for an automated due diligence solution offering a thorough contract compliance assessment feature. Evident’s Third Party Risk Management Platform helps identify missing contractual terms, such as unmet general liability minimums, and safeguards your company from unnecessary risk.

Multi-Source Data Collection

The best automated due diligence platforms, such as Evident, gather and verify various risk-related documents, including:

• Certificates of Insurance (COI)
• W9 forms
• Contracts
• Contractor licenses
• Business licenses
• Hold harmless agreements (HHA)

This comprehensive approach provides a holistic view of supplier compliance and risk.

Evidence Analysis

Analyzing evidence is an essential function of these solutions. Automated systems like Evident’s review uploaded documents to verify they meet your standards. This includes checking expiration dates and confirming that all required information is present and accurate.

Implementing Automated Due Diligence

By integrating advanced technology into supplier evaluations, automated due diligence provides levels of efficiency and precision previously unattainable through manual processes.

Choosing the Right Solution

When choosing a solution, consider factors such as:

• Ease of use
• Scalability
• The ability to handle diverse data sources

Look for tools that offer comprehensive features, powerful security, and reliable customer support.

Integration with Existing Systems

For smooth operation, your tool of choice must be compatible with your current software and infrastructure, facilitating data flow without disruptions. Successful integration minimizes downtime and optimizes overall efficiency, which allows your team to focus on strategic tasks rather than technical issues.

Case Study

A prominent example of effective implementation is one of our clients. Though we can’t name the company, one of the world’s largest marketplaces uses Evident to verify local services. This client pre-vets local companies to meet specific standards and qualifications before allowing them to advertise on its platform.

Pre-vetting can include several elements:

• Background checks: Verifying business licenses, insurance, and certifications. In some categories, we conduct background checks on individual employees who provide service.
• License and Insurance Verification: Collecting proof of relevant licenses and insurance. We verify this information to confirm the target company can legally provide the advertised services and carries adequate insurance coverage.
• Identity Verification: Verify the identity of business owners and key personnel to avoid posting fraudulent listings.

This case study is connected to due diligence in three ways:

1. Risk mitigation: Thorough background checks and verification processes mitigate the risks of fraud, poor service quality, and legal non-compliance. This protects our client’s reputation and the consumers who use their platform.
2. Compliance assurance: To shield our client from legal non-compliance, we verify businesses have the necessary licenses and that their insurance coverage aligns with regulatory standards.
3. Fraud prevention: Identity verification and background checks help prevent fraudulent activities. This is one of the primary purposes of due diligence, designed to verify the authenticity and reliability of our client’s business partners.

How Evident Enhances Due Diligence

Evident is revolutionizing third-party risk management by automating the collection, verification, and continuous monitoring of risk data. Let our cutting-edge SaaS platform shift your company from reactive to proactive risk management with our cost-effective, accurate, and scalable solutions. With Evident, your company will gain insight into hidden threats within customer, partner, and supplier relationships.

Request a demo today to learn how Evident can transform your third-party risk management program.