Best Practices for Remote Due Diligence

The massive and hasty transition of companies to remote modes of operation has significantly exacerbated the problems of information security. Most companies faced such a task for the first time, so the transition to “remote work” caused them a lot of difficulties.

Remote Due Diligence: Issues and Recommendations

The term “due diligence” literally translated from English means “diligence.” In the Western tradition, this is the name for a large-scale check of a business partner before a merger or conclusion of another significant transaction. During such an audit, the activities of the counterparty are analyzed from a legal standpoint and the state of finances is checked.

The role of due diligence is changing – there is a need for new skills: management of systems directly gives way to the management of services provided by providers. Now, due diligence professionals need to be more than just technology experts – they need the skills to integrate old technologies and new services, but they also need to continue to comply with established regulations, ensure the availability of current technologies, and control costs.

On the technical side, remote due diligence has become a problem for companies that did not work in this format before and switched to it in a hurry. Typical mistakes – here they didn’t protect the remote connection channel, they didn’t set up two-factor authentication there, they distributed redundant access to corporate resources here – “so be it, for now, then we’ll take the extra.” As a result, the traffic of remote sessions could be intercepted by intruders, and employees could get access to confidential data that they were not supposed to work with by their position.

Plus, not everyone had enough power to support the stable operation of corporate resources with a lot of remote connections. As a result, they switched to public services, working documents were transferred “for convenience” in instant messengers and social networks, and stored in personal data rooms. All these are the risks of accidental and deliberate leaks. The due diligence practices are “agreements between companies to engage in specific types of joint activities, often through the creation of subsidiaries jointly owned and controlled.

What Are the Best Practices for Remote Due Diligence?

A characteristic feature of remote due diligence is that in a relatively short period of time it quickly moved from local transactions to large cross-border transactions. The key reasons for the significant due diligence decline include the high level of uncertainty about the future of the economy after the crisis, a sharp increase in risk aversion, which in any case are present in M&A transactions, a significant gap in the assessment of potential transactions between buyers and sellers.

Among the best practices of remote due diligence are:

  1. Ensure You Have the Right Technology.
  2. Prepare for Longer Due Diligence Periods.
  3. Remember Confidentiality Issues.
  4. Engage with the Right People.
  5. Have Organized Meeting Agendas.
  6. Communicate Often with Key Stakeholders.

In general, due diligence practices require research, analysis, and drawing appropriate conclusions in order not to repeat the mistakes repeatedly made in the past. These integration processes are complex and ambiguous both in theory and in practice. The consequences of mergers extend their impact not only to players in the industry or field of activity in which they are carried out but also to larger entities, such as national economies and even the global economic system.