Effective due diligence is an important process that helps businesses make smart decisions and reduces risk. However it can be a lengthy and complicated task, especially when it involves complex transactions. A bad experience could lead to significant financial losses. JPMorgan Chase’s $175 million purchase of student loan startup Frank is a prime example.

Effective due diligence is necessary when assessing a customer or contracting with a third party service provider. This requires a significant amount of information gathering that goes beyond the usual compliance checks. It starts with an extensive risk assessment which includes factors such as the geographical location and the industry sector. It also includes thorough background checks, as ideals well as investigating ownership structures and legal history. It also involves assessing the third party’s compliance with regulatory requirements and anti-money laundering policies.

The more a due diligence program is focused on tasks that require judgment and judgement, the more successful it will be at developing this ability. It is important to automate routine data collection so that a business can focus on these judgement-intensive tasks.

Due diligence tools can speed up the process and help businesses save time and money and still ensure that all checks are carried out. The best tools facilitate seamless sharing, tracking and collaboration among teams and other stakeholders. They also include features like versions control, security settings and audit trails. They also provide an encrypted repository to manage, store and access due diligence documents. This allows for an improved and more efficient workflow across multiple jurisdictions.