Due Diligence Tools
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Through intelligent automation, due diligence tools detect new questions and suggest answers automatically—no more manual entry. Learn why Financial Services companies love Loopio.
What are Due Diligence Tools?
Due diligence is the step to satisfy a legal requirement (or verify information) before agreeing to a contract where something is being bought or sold. In business, due diligence is an effort to analyze information before entering into a contract with another company.
Due Diligence Meaning
Due diligence helps investors and companies understand the risks involved in business deals. You don’t want to do business with someone without a thorough understanding of what it is they do, how they can benefit your business—or sort of challenges you may encounter when working with them.
Due diligence tools make it easier for businesses to assess contracts with potential new partners, vendors, or service providers.
For example, a company may issue a due diligence questionnaire as a way to gather information about several businesses at the same time. If you’re completing one of these questionnaires, you’ll want to submit better answers than your competition—which due diligence questionnaire software helps with. Keep reading to find out how.
Loopio’s intelligent DDQ software enables users to craft compliant DDQ responses with a quick turnaround. The platform auto-fills content using a library of pre-approved answers. This way, you can find accurate answers whenever you need them and streamline your DDQ process overall.
Understanding Due Diligence Risk
So we’ve explained the benefits of due diligence tools, but why is a due diligence process so important? Simply put, it helps businesses mitigate potential risks.
One of the ways that companies do this is through a due diligence risk assessment. These assessments involve questions related to client security programs, finances, and business operations. The point is to get an idea of whether or not partnering with that company would be a good investment. So when participating in an assessment, it’s essential to outline how you address the client’s security concerns.
When undergoing a due diligence risk assessment for the first time, it can be helpful to use a due diligence risk assessment template for guidance. A template can provide detailed instruction on carrying out your assessment for best results. Your template may include a checklist of important due diligence items you should cover when assessing a potential business partner.
What’s Supply Chain Due Diligence?
Mitigating risk throughout the entire supply chain is particularly important for large companies. This is because many companies partner with multiple vendors to fulfill all aspects of their product development, so they must evaluate each vendor carefully to assess risk and value. That’s where supply chain due diligence comes in.
Participating in a supply chain due diligence questionnaire is a great way to prove why you’re more qualified than other vendors—if you can pass on the requirements in a timely fashion. For instance, the questionnaire might ask you what type of goods you can deliver, how quickly you can deliver items, and what risks, if any, are involved in the process. This gives a good indicator of overall business operations and how compatible—or not—your businesses are.
Similarly, vendor due diligence services exist to help companies evaluate vendors and ultimately partner with those that offer the most promising return on investment. Although due diligence requirements do vary by industry, there’s one common goal across all: minimizing legal and reputation risk.
Managing Compliance and Due Diligence
Compliance and due diligence are critical to ensuring the success of your business partnerships. Like any contract, you don’t want to enter an agreement without first aligning on what working together entails. That’s why many companies undergo an exercise to avoid unnecessary exposure to risk.
Due Diligence Investigation Meaning
An investigation is done by thoroughly researching potential partners and clients, then deep-diving into business history and evaluating success. (A red flag to avoid: working with someone with a history of failure or legal trouble.
Creating a compliance due diligence checklist is a great way to ensure you hit all important items when performing a due diligence assessment. Depending on your industry, there are various aspects of compliance you’ll be asked to provide, and it’s important to participate in a holistic assessment, in order to give an accurate picture of finances, legal risk, and company trajectory.
While there isn’t necessarily a right or wrong way to answer compliance assessments, following industry guidelines or a checklist is helpful as these documents are fairly standardized. Whether you use a checklist or not, it’s important to note that speed does matter when it comes to due diligence. If it takes weeks to gather requirements, you’ll risk falling behind competitors.
With Loopio, you can streamline the legal and compliance review process using a collaborative workspace. Here, you can create templates, set milestones, and send notifications to keep the team on track (example below).
You can keep the entire team on track with a streamlined DDQ or RFP process, and ideally, complete more questionnaires in a shorter period of time. Loopio’s time-saving automation tools also auto-detect questions and automatically suggest answers—which can be extremely helpful if you’re completing any kind of compliance or due diligence assessment.
Building Your Due Diligence Database
Companies that regularly answer due diligence questionnaires can benefit from a due diligence database or a digital collection of due diligence answers. Rather than digging through email chains or Slack threads, you can simply log into your centralized database and pull up the information you need.
You can also use the information extracted from your database—also known as a DDQ library—to create a simple due diligence checklist or key workflows to help your team respond even faster. For example, Loopio’s platform helps businesses improve their process by setting up automated review cycles for due diligence answers. This keeps content up-to-date with ease—which is critical, considering accuracy’s importance to the due diligence process.
The best part of having a database? You can even create a due diligence report of your team’s performance. By examining your performance with a bird’s eye view, you’ll be able to make informed business decisions around your DDQ process.
Case Study: Due Diligence Example
Due diligence tools help companies reduce the time spent on tedious tasks in the risk management process.
For financial services, in particular, this type of software can save a lot of time (and money)—here’s a helpful example of the results HedgeServ has seen since improving its DDQ process.
Due Diligence Example: HedgeServ Results
- Compliant and quick DDQs: Reduced the time it takes to respond from three days to four hours.
- Version control issues eliminated: Collaboration is easier with content stored in one central location.