Due Diligence Risk Factors

Due diligence risk factors are the areas of an organization or project which must be evaluated to determine if there are any risks to the goals and objectives website link. These include the financial, legal operational, and IT aspects of a business.

Customer due diligence (CDD) is a good example of due diligence. This involves confirming an individual’s identity and assessing their level of risk in order to ensure the compliance of anti-money laundering laws and countering the financing of terrorist laws. CDD typically occurs before the first customer is welcomed and regularly throughout their relationship with the company. It is crucial to know how often each risk type should be re-examined.

For instance it’s likely to be unreasonable and excessive for an organization to carry out CDD on every country or business associate it has around the world, especially when some of them present a low risk of corruption. A business should utilize its GIACC program to categorise and identify countries, projects, and business associates based upon the likelihood they’ll be a source of corruption. Due diligence must be conducted on those that are deemed to pose a higher risk.

Another example of due diligence is IT due diligence, which includes an evaluation of a target company’s infrastructure for information technology, cybersecurity and data management practices. This can identify potential risk or cost that could be related to the purchase of a target, for example, replacing hardware or software. This can also reveal any IT system vulnerabilities which could reveal sensitive data.

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