Why You Should Digitize Your Due Diligence Data and Document Collection

Blog post Team CENTRL 2022-01-31

Digitize Your Due Diligence Data

Operational due diligence, or ODD, is an investor-initiated process for assessing the operational infrastructure of investment managers and funds.

Its primary purpose is to identify and mitigate potential operational risks associated with that investment. Due to the expanding risk landscape and mounting regulatory pressures, the value of ODD is constantly growing.

The due diligence process involves collecting questionnaires, assessing the responses, interviewing the investment manager, and reviewing any supporting documents.

In essence, ODD is about reviewing and evaluating information to discover and understand the key risks of a potential high-risk investment. But to ensure that the ODD is reliable, robust, and accurate – data is critical.

And here’s where ODD professionals face one of their biggest roadblocks – how to collect this information efficiently to improve risk assessment, prevent reputational damage, and maximize returns for stakeholders.

The old-fashioned means of collecting ODD data is rife with problems. So is automation of ODD the answer? Let’s explore this critical question.

The Challenges of Data Collection for Operational Due Diligence

ODD is impossible without data. But the availability of quality, relevant and timely data largely depends on how it is collected, processed, and protected.

Legacy data collection methods are not exactly ideal for supporting modern-day ODD requirements. They create two critical challenges that impact ODD processes and create unexpected liabilities and significant operational risks for investors.

Challenge #1: Acquiring the Required Data and Documents Through Online Portals

Consider a manual process to collect the relevant data and documents to perform operational due diligence.

An ODD practitioner and investment team might have to log in to an online portal where all this information or documents might be stored.

In addition to navigation hassles, they would have to search through multiple folders and subfolders to locate relevant files. Then they would need to save those files on their local machines or a shared network drive.

All these manual activities would take up many working hours, which would affect their productivity. And even then, they might miss locating or downloading some critical documents.

They may even make errors while filing or saving documents. These challenges can slow down the ODD process, and even affect its accuracy and reliability.

Challenge #2: Acquiring the Required Data and Documents Through Emails

In addition to onsite visits, email-based communication has always been important in ODD. But although emails allow various parties to share information and updates with each other, the channel is not optimal for coordination, traceability, or real-time updates.

If anything, in most ODD processes, email adversely affects productivity and efficiency. Often ODD professionals must chase investment managers through numerous emails and track responses from each.

To make matters worse, they must also check and re-check the accuracy and validity of information by looking at multiple Excel spreadsheets, Word documents, and PDF files. Different teams may store these documents in other locations, making them difficult to find by those involved in the ODD process.

This confusing mix of emails and documents in different formats creates what can only be described as “email and excel hell” for ODD processes.

These issues make ODD time-consuming, introduce errors, cause frustration and rework, affect risk management, and impact the quality of investment and business decisions.

Other Issues Caused by Manual Processes and Legacy Data Collection Methods

As the earlier section shows, legacy data collection methods have an adverse impact on ODD.

They also affect collaboration between multiple parties since they struggle to share data, search for information, or get visibility into ODD activities, status, risk assessments, issues, and resolutions. Then there are the problems created during audits.

Often, ODD teams scramble to get the necessary information by taking device screenshots, going through masses of emails, and reviewing hundreds of documents in many different formats.

Despite all this effort, they struggle to get the necessary information for a successful analysis. As investors start increasing the size and frequency of their investments, manual data collection methods for ODD are neither sustainable nor scalable.

Instead, digitization and integrated ODD platforms like ODD360 from CENTRL are what’s needed.

How Digitization Resolves these ODD Data Collection Challenges

Digitization reduces the time ODD practitioners spend collecting information, communicating with various stakeholders, and searching through documents.

Due diligence software like ODD360 also provides a single source of truth as it centralizes all files and data to provide ease of access and classify documents appropriately.

As a result, it helps streamline the third-party due diligence process, reduces the data and file management effort, and enables ODD teams to focus on more value-adding activities.

Digitization resolves the communication and collaboration problems associated with manual data collection, multiple emails, and non-standardized documents. A digital platform like ODD360 also provides:

  • An intuitive user interface.
  • Standard document templates.
  • Assignment workflows.
  • Detailed histories to streamline communications in the third-party due diligence program.

These capabilities allow teams to get the information and documents they need to collaborate better during due diligence.

They can automate document sending into the central repository with appropriate links or tags, preview document contents without opening them, and even automate email flow by tagging and uploading emails with crucial metadata.

The best platforms provide regular updates, as well as detailed dashboards and reporting. They also clearly display any changes to risk thresholds. These features improve risk understanding and risk management and enhance investment decision-making.

ODD360: Leading the Digitization Charge for ODD Data Collection

Old-fashioned data collection methods seriously impair operational due diligence’s effectiveness, reliability, and outcomes. Investors and fund managers need better ways to collect data and organize documents in the current complex investment landscape.

ODD360 provides such a solution. The platform is ideal for investors, consultants, and fund managers looking for a centralized source of truth available in real-time in the cloud.

ODD360 is an advanced solution for data collection and document management in ODD processes. With this single document repository, ODD practitioners and teams can automate the acquisition and tagging of all relevant documents and information.

This is a radical departure from old-fashioned, non-intuitive file folders that are very difficult to navigate through.

Organizations can easily customize the platform and add new fields, entities, or layouts their teams need. Plus, the platform’s intuitive user interface, cloud-based and mobile functionality, and automated workflows further streamline data and document collection.

Moreover, its automated risk score capabilities, dynamic dashboards, question-level benchmarking, and automated reports provide a centralized source of truth and improve ODD activities’ quality and effectiveness.

ODD360 brings dramatic efficiency improvements with features like:

  • Fully automated DDQ and RFI workflows
  • Ability to extract and analyze answers from DDQs
  • Pre-populated answers
  • Hassle-free issue management

ODD360 provides even more features so that consultant providers can deliver superior customer due diligence offerings.

For instance, they can manage the central repository of all reports and control distribution to clients. They can also publish manager reports and track clients’ report usage. The portal also eliminates spreadsheet-based DDQ, email clarifications, and manual portfolio analytics.

ODD360 can increase the efficiency of ODD workflows by 50% or more and deliver average cost savings of 30-40%.
Request a free live demo to learn more about automating data and document collection with ODD360.

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