Due diligence risk factors are the areas of an organization or a project that should be assessed to determine if there are any risks to the goals and objectives. These include the legal, financial operational and IT aspects of a company.
An example of due diligence is customer due diligence (CDD). Verifying the identity of a person and assessing their risk level is an essential part of this process. It assists in ensuring compliance with anti money laundering and anti-terrorism laws. CDD typically happens before the new customer is enrolled and is then repeated periodically throughout their relationship with the firm. It is crucial to know how often each risk category needs to be re-examined.
For instance it’s unreasonable and excessive for an organization to carry out CDD on every country or business partner it has across the globe, particularly in cases where some of them have a low risk of corruption. A company should utilize its GIACC program to categorise and identify countries and projects as well as business partners based on the likelihood that they’ll be the source of corruption. Due diligence should be conducted on those who are deemed to pose a higher risk.
Another type of due diligence is IT due diligence, which includes an assessment of a target company’s IT infrastructure security, data management and cybersecurity practices. This can help identify risks or expenses associated with the purchase of a target, such as replacing hardware or software. It can also reveal any gaps in the IT system that could expose sensitive or sensitive information.