The Role of Technology in Streamlining Operational Due Diligence

In today's fast-paced investment landscape, Operational Due Diligence (ODD) and ongoing monitoring are crucial in identifying risks and evaluating the performance of investment managers. Capturing issues early can help you to avoid any reputational, operational or financial risks. As the volume and complexity of data increase, technology has become essential, enhancing the speed, accuracy, and depth of ODD and Monitoring. Leveraging advanced tech tools, businesses can make more informed, strategic decisions while minimising risks. The below strategies demonstrate how technology is being used across industries to enhance and streamline ODD and monitoring programmes.

1.        Data Collection Automation: Efficiency Redefined

Traditional due diligence often involves painstaking manual data collection from various sources, a process that is both time-consuming and susceptible to errors. Modern technology revolutionises this aspect by automating the aggregation of information from diverse channels. AI-driven tools can seamlessly scan and extract critical data points from financial statements, legal documents, and operational reports. This automation not only reduces the time spent on mundane tasks but also ensures a higher level of accuracy, allowing analysts to focus on strategic evaluation and decision-making.

2.        Ongoing Monitoring: Searching the Web

Screening for issues with your investment managers is often either a manual process in a constant attempt to stay ahead of the news, or a way to get flooded with noise to the point you miss the important articles and their impact. It’s impossible to read all news on all investment managers, so Adverse Media Monitoring tools that use AI to track news and public sentiment on organisations, their key staff or even underlying portfolio companies can be a clever way to filter the noise. Personalised news alerts flag potential risks or reputational concerns, enabling investors to respond quickly to emerging issues.

2. Intelligent Data Analysis: Unlocking Deeper Insights

AI and machine learning has significantly enhanced the analytical capabilities available during ODD. These technologies can process vast datasets to identify patterns, trends, and anomalies that might elude human analysts. Tools like Financial Statement Analysis automate the extraction and scrubbing of financial data from general partners, presenting it through intuitive dashboards. These dashboards offer trend analysis and pinpoint potential red flags, facilitating both qualitative and quantitative monitoring of external fund managers.

3. Enhanced Collaboration Tools: Seamless Communication

Effective communication is essential for coordinated due diligence efforts, especially when teams are dispersed geographically. Specialised due diligence software provides robust communication channels that centralise messaging, and real-time document sharing. This seamless connectivity ensures that all team members remain aligned, fostering a collaborative environment that accelerates the decision-making process, also minimising delays. No more segregated email chains and lost data.

4. Secure Data Sharing

Security and confidentiality are paramount during ODD, as sensitive information is frequently exchanged between parties. A secure and controlled environment for storing and sharing proprietary data rather than using email and other formats. These permission-based platforms ensure that only authorised personnel can access specific documents, maintaining data integrity and privacy, and ensuring a single source of truth.

5. Cyber Security: Understanding the Threats

Investment managers are obvious targets of cybercrime. Cyber security is often seen as one of the greatest risks to an organisation and is top of mind for most Boards currently.  External ongoing scans can track an organisation’s network footprint for vulnerabilities or exposures that leave them at risk if a hacker were to target them. Scoring allows organisations to be compared and benchmarks to be created by industry to encourage performance improvements. Combining continuous cyber monitoring with internal assessments of the organisation’s policies and infrastructure can ensure that your investment managers have robust and secure controls in place to prevent attacks.

6. Environmental, Social, and Governance (ESG) Analysis: Comprehensive Impact Evaluation

Evaluating ESG factors have become increasingly important. Technology aids in aggregating and analysing ESG-related data, enabling investors to assess a company’s sustainability practices and social impact. Tools that specialise in ESG data provide comprehensive insights that inform long-term investment strategies, ensuring that investments align with ethical standards and contribute positively to society.

All In Once Place

Entity Profiles, in addition to a view across the portfolio, offer the ability to bring together all information on a single counterparty,  crucially centralising operational data for a holistic view of an investment manager. By highlighting key strengths, weaknesses, and growth opportunities, this tool provides investors the option to drill down to the  detail of an entity’s operational profile and future potential. If you’re planning an onsite – an entity profile can give you everything you need on an investment manager to streamline your visit.

The Future of Operational Due Diligence: Embracing Technological Advancements

As business environments continue to evolve, the role of technology in ODD will grow even stronger. Emerging technologies such as AI, blockchain, and advanced analytics promise new insights and efficiencies, allowing businesses to better navigate market complexities, reduce risks, and uncover opportunities.

Technology is reshaping operational due diligence by automating data collection, enhancing analysis, ensuring secure data sharing, and offering comprehensive operational insights. Tools like Orbit Risk include features such as Adverse Media Monitoring, Financial Statement Analysis, My Portfolio and Entity Profile Dashboards that exemplify the powerful impact of technology. As business landscapes become increasingly data-driven, adopting these tools will be key to achieving due diligence excellence and securing successful outcomes for businesses as well as investors.