The advent of the internet and electronic communications facilitated due diligence. However, much of the work remained manual. Financial analysts, lawyers, and other experts grappled with mountains of digital data that needed to be collected, sorted, and then meticulously reviewed for both risks and opportunities. Furthermore, participants relied on inefficient and insecure communication and data exchange tools, like email attachments and insecure file-sharing platforms. This time-consuming approach increased the risk of inconsistencies and errors. But then due diligence software changed the game by doing lots of routine tasks automatically.
The Need for Due Diligence Software
Conducting due diligence involves many aspects of working with digital information, from collecting data from various sources to preparing a report and implementing recommendations. This is hard and tedious work that requires considerable effort and is time-consuming if done manually. Thus, depending on the size and complexity of the transaction, due diligence may take from one to several months. The consequences of this approach can be ineffective communication between parties to transactions, disorganization and human errors.
However, there is a method that can significantly speed up and simplify this process, minimizing the risk of mistakes. This is the use of due diligence software (DDS). These tools are specifically designed to streamline workflows associated with processing massive volumes of financial, legal and reporting information. The programs automate the collection and analysis of data, eliminate the human factor, and provide secure access for participants in the business process through a single centralized platform.
Key Features of Due Diligence Software
DDS can perform a wide range of tasks, from collecting disparate information to building secure communication channels between a business’s team and external consultants. Key capabilities of due diligence tools include:
- Centralized Storage: The program collects and stores all data from different sources in one place, including financial statements, emails, contracts, presentations, and other documents related to the target company. All collected files are indexed, sorted, and tagged for quick search.
- Automated Viewing: Due diligence applications can read documents, extracting relevant phrases and keywords, which saves companies time.
- Audit and Version Control: The programs allow you to track all changes made to documents with timestamps and user information.
- Access Control: Administrators can configure access levels to confidential documents for specific groups of participants.
- Collaboration: The software facilitates document collaboration and keeps users notified of changes.
- Analytics and Reporting: DD software allows you to create detailed reports with graphical elements like charts, dashboards, risk heat maps, etc.
The most well-known and popular due diligence programs are:
- SafetyCulture (iAuditor): A comprehensive cloud-based platform that streamlines due diligence for business projects and investments.
- Riskonnect: Analyzes risks and helps predict potential outcomes of business decisions.
- DiliTrust Governance Suite: A universal platform that automates and optimizes workflows for legal and corporate departments.
- Resolver: Excels at identifying specific risks associated with mergers and acquisitions.
- Ideagen: This program not only manages and optimizes business processes, but also ensures secure communication between stakeholders.
These programs all want to help when companies buy or merge with other companies. But, they might focus on different parts of the process. For example, SafetyCulture helps manage risks in how a company runs. Ideagen makes sure companies follow all the rules they need to follow.
Pros and Cons of Using Due Diligence Software
The use of DDS allows companies to more effectively solve problems caused by factors such as growing volumes of incoming information, geopolitical instability, and fluctuations in prices for goods and services. However, this approach is not without drawbacks. Fortunately, there are few of them, but the benefits are much greater.
Benefits:
- Save time. By taking on a significant portion of the work of collecting, analyzing and processing documents, the programs save time for company managers, so they can focus on strategic analysis and decision-making.
- Reduced costs. Manual data processing requires significant human and therefore financial resources. Automating this process reduces dependence on personnel and saves money.
- Increased accuracy. Automated systems aren’t prone to errors, while a human employee may become distracted or tired and make an error when entering or analyzing data.
- Effective collaboration. DD software allows you to unify work processes, thereby simplifying communication between team members and increasing the efficiency of collaboration.
The disadvantages of the solution include the potentially high cost of implementation for smaller companies and the need for employee training as due diligence software requires specific skills. While powerful, DD software cannot account for all the intricacies of business processes even if it uses the power of artificial intelligence. Therefore, it complements, not replaces, qualified specialists.
Tests and Cases
Testing of DDS by independent experts shows that in most cases programs of this type quite successfully cope with the tasks assigned to them. Below are three main scenarios for working with due diligence software.
Scenario 1: Processing Speed and Accuracy: Tests measured the speed of processing large document volumes in PDF, Word, and Excel formats. For instance, SafetyCulture processes 10,000 medium-sized files in just over an hour, which is impressive. However, some document types might cause indexing issues and unexpected delays. In addition, the search engines built into DD software may not be intuitive enough.
Scenario 2: DD Software generally demonstrated a high degree of integration with other software platforms, such as accounting software, project management software, and document management systems. However, integration capabilities can be limited due to compatibility issues or complex APIs in other applications.
Scenario 3: Security test results showed that DD software can offer granular permission control, providing different levels of access for different user groups. However, in the case of using cloud platforms, the issue of security will remain open. Therefore, the use of additional encryption tools will not be unnecessary.
The software is able to attract everyone’s attention, and its versatility really sets it apart from the rest!
Combining Technologies
According to a global McKinsey survey, cloud and artificial intelligence technologies are now used by about 60% of companies, with a particular focus in the DDS development field. For instance, a good example of this is SafetyCulture, which operates on a cloud-based platform and uses AI to recognize specific objects in images, make predictions, identify recurring problems and potential risks. Another well-known program, DisTrust Governance Suite, uses artificial intelligence to monitor regulatory changes and manage compliance risks. In the case of blockchain, Due Diligence Software’s use of this technology is still in its early stages of development.
Summary
Due diligence software is a powerful and intelligent assistant that can revolutionize the way you collect and analyze business information. In addition to significant savings in time and financial resources for any company, DDS provides greater efficiency and accuracy in data analysis by finding potential red flags and hidden risks in texts that people may not notice or miss. If you are looking for a way to improve the efficiency, accuracy, and cost-effectiveness of your due diligence process, then due diligence software is a valuable investment.