Due diligence software buyers’ guide: Uses, types & features

Businesses are more dependent on third parties than ever. Yet, 98% of organizations worldwide have vendor relationships with at least one third-party that has experienced a breach within the last year. Amid mounting regulatory pressure, increasingly costly risks and ever more complex supply chains, due diligence software is now a mission critical tool for vetting third party relationships before it’s too late.

At its best, due diligence should power better decisions and informed risk-taking. Through a risk-based approach and with powerful software, due diligence combines human research and analysis with AI monitoring to leave no stone unturned. This buyers’ guide will pull back the curtain on the software buying process, including: 

• What due diligence software is
• The benefits of adopting software-aided due diligence
• Types and features of due diligence software
• Our due diligence software-buying checklist

What is due diligence software?

Due diligence software helps an organization investigate and vet third parties before entering into a business relationship and manage due diligence and monitoring throughout the lifecycle of each engagement.

These software products are designed to solve the many headaches that come with traditional due diligence. While due diligence is a critical, it’s also time-consuming and data-heavy, challenging organizations to complete the process on time and translate that data into actionable insights.

The best software will reduce the time and resources required to complete due diligence while raising the standards on third-party insights and assuring compliance with global regulations such as anti-bribery and corruption (ABAC), anti-money laundering (AML), environmental, social and governance (ESG), human rights and more.

Benefits of adopting due diligence software

At its most basic, due diligence is a process. However, the right software streamlines workflows for risk and compliance teams and leads to benefits in other business areas. These benefits include:

• Efficiency: Due diligence software automates time-consuming processes that don’t require human intervention, leaving risk and compliance teams free to conduct in-depth analyses and make more strategic recommendations about every potential partner. 
• Accuracy: Human error is expected but costly. Algorithms within due diligence software validate data accuracy, ensuring all decisions are based on reliable data.
• Security: Due diligence is, first and foremost, a risk management practice. Software adds another layer of security by encrypting all data, reducing the risk of breaches or unauthorized access. 
• Compliance: It’s critical that organizations comply with ABAC and other regulations. Many due diligence software options are built around compliance, making it easier for organizations to follow processes that hold up to regulatory scrutiny. 
• Confidence: Third parties self-report information via a due diligence questionnaire, which can introduce inaccurate or fraudulent disclosures. The right software can power your own investigation with independent verification of any data third parties provide.

Types of due diligence software

There are several key terms that compliance professionals frequently search for when exploring due diligence software. While these terms represent different focuses within the due diligence process, it's important to note that they are not always distinct solutions, and some software products may overlap in functionalities. Here are some of the most commonly searched types of due diligence software:

• Financial due diligence software: These products help businesses analyze financial data to more quickly visualize their potential partners’ financial health.
• M&A due diligence software: Businesses pursuing mergers and/or acquisitions use this software to centralize all information to make more informed decisions about the partnership’s potential.
• Cybersecurity due diligence software: These solutions focus on uncovering a company’s risk exposure related to cybersecurity by identifying any vulnerabilities in its digital systems.
• Compliance due diligence software: Businesses must ensure that potential partners comply with relevant regulations. This software’s purpose is to assist that determination.
• Enhanced due diligence (EDD) software: This process adds a layer of investigation to verify the third party’s identity. EDD software supports the process by offering in-depth intelligence reports based on local resources.
• Third-party due diligence software: This software helps organizations vet potential third-party partners through the lens of risk.

7 features of the best due diligence software

Due diligence software should enhance accuracy nd efficiency while offering the data organizations need to make better decisions. Look for the following features to ensure your due diligence software can deliver those benefits.

1. Security and access control: Strong security measures can protect due diligence systems from breaches and unauthorized access. Ensure your solution features encryption, authentication and role-based access.
2. Robust risk modeling: Third party-related risks evolve often, introducing threats that either weren’t developed or weren’t as damaging when the relationship began. Risk modeling tools calculate risk scores and probabilities using real-time insights about the partnership and the legal and regulatory landscape that governs it.
3. Comprehensive screening: Due diligence must be rigorous to ensure third parties meet specific compliance and risk management standards. Screening tools add a layer of assurance by collecting and analyzing a wide range of data to uncover risks and ensure compliance.
4. Automated workflows: Even great due diligence software can miss the mark if you must manually initiate every feature. Your software should include automated workflows that either facilitate a compliant due diligence process or put parts of the process on autopilot so results are served up with minimal intervention.
5. Document management: The due diligence process involves countless documents, including questionnaires, legal documents and financial statements. Look for software that not only securely stores all documents but can also organize and retrieve them for easy reference.
6. Meaningful reporting and analysis: Due diligence software should be able to analyze data to assist with risk assessments. However, this is one area where human analysis makes the difference. Look for a solution that integrates AI with human research and analysis to strike a better balance of efficiency and expertise. The same tool you use to analyze data should also be able to automatically created detailed reports and dashboards.
7. Independent investigations: Due diligence requires both AI and automation and human expertise. Look for software that can connect you with skilled professionals to verify any information you collect through due diligence.

Due diligence software checklist

Knowing the key features of due diligence software matters, but it’s only the first of many steps to properly evaluate software solutions. Once you’ve started the discovery process, go through each of the following steps to ensure you find the right due diligence software for your team.

• Define your needs: Identify the types of due diligence the software will support and the process improvements you hope to achieve, like greater efficiency or better risk mitigation.
• Establish a budget: Some due diligence software options are more costly than others. Create a budget to determine which option offers the most features for the price.
• Assess compatibility: Look for software solutions that can easily integrate with your existing processes, systems and workflows.
• Check the user interface: How easy is the software to use? Look at the user interface to ensure it's intuitive and easy to use. Make sure the provider also offers comprehensive training and resources so your team knows how to capitalize on every feature.
• Review security and compliance measures: Any software solution you choose should be secure, but you should also verify its compliant with your industry’s regulations, like HIPAA or GDPR.
• Analyze all features: Using the list we provided earlier, review every feature the software offers to ensure you won’t end up with gaps in your due diligence process.
• Verify data sources: Depending on the types of due diligence you conduct, you may need various data sources. Check that the due diligence software you choose can pull all the data your process depends on.
• Ask about customer support: What action will the provider take should something go awry? Inquire about how much customer support you’ll receive and what other resources are at your disposal.
• Explore offline options: Data is just one piece of the due diligence puzzle. Ask a potential software provider if they pair analytics and AI with field-based investigations or validation to add an extra layer of assurance to the due diligence process.
• Read reviews: Chances are, if many organizations are happy with a due diligence software solution, you will be, too. An odd negative review here or there is common, but make sure the provider you choose doesn’t have patterns of poor feedback.
• Data backup: Even the best software can experience a hiccup. Verify that you can back up and recover your data no matter what disaster may strike.
• Look into customization options: An out-of-the-box solution may meet your needs, but you also might want some customization so the software fits seamlessly into your due diligence process.
• Validate vendor reliability: Ideally, your due diligence software provider will be a long-term partner. Check that they’re financially viable and operationally stable so you won’t have to change software after a few months.
• Request a trial: If all the features check out, ask for a trial. Working through test projects within the product will help you suss out any hidden incompatibilities.
• Finalize the relationship: If you love what you see during the trial, consider formalizing the relationship. Pay special attention to the support levels and the length of the relationship — you want options if you need to pivot your usage or end the relationship entirely.

Power better decisions with due diligence services

Due diligence software can turn an overburdened team into an efficient, risk-mitigation engine. However, not all risks can be uncovered with one system or screening software alone. Some cases necessitate further due diligence examination, independent investigations, or field research.

Diligent Due Diligence Services goes further than standard due diligence software can, offering a powerful combination of AI-assisted monitoring and human research to unlock deeper levels of due diligence. Start executing on thorough, risk-based due diligence supported by: 

• Screening against known watch lists
• Search tools to monitor media-based risk
• Identification of direct and circumstantial red flags
• Field investigations to gather local intelligence
• Expert analysis and reporting
• Deep commitment to ABAC compliance

Learn more about Due Diligence Services or schedule a demo today.