Operational Due DIligence Challenges
Institutional Investors like Pensions, Endowments, Family Offices, Consultants and Fund of Hedge Funds look at Alternate investments,PE firms, Real estate funds and others to include different investment strategies in their portfolio to meet their returns goals. This means scouring the market for large number of opportunities before deciding on a few investments. This creates a lot of data to be managed. Identifying which organizations are good and what areas in each organization’s operations are weak become difficult in the large volumes of data.
Comparing organizations for their strength and weakness to identify investment worthy organizations also becomes difficult if this data is not available in organized forms.
After investments are made, it is important to conduct regular data gathering and monitoring of the firms to ensure that risk trends seen in them are noticed early enough to protect your investments and take corrective action.
How Can You Manage this
Keeping all this data in Excel files and Word documents has been the normal practice.
Having a system and a process to gather information on all the firms which are being considered, in a central data repository with web based access to the due diligence staff, along with all the documentation received, a calendaring for follow ups, contact information, and a workflow based method for the investment managers to include this information during their investment committee meetings would be a good way to avoid information overload and needle in the haystack approach to finding information.
It is important to be able to risk rank information with notes to use to make your investment decision and keep track of rationale and reasons when decisions were made. It is also equally important to have a continuous monitoring process for investments to identify risks in a proactive way rather than lose value of your portfolio you to retrieve the situation
How GRACE Empowers Your Due Diligence Team
GRACE is a web based / tablet enabled Mobile system that can help you gather all the data on current and prospective investments in a central data repository, making it easy to retrieve any time any where.
The mobile nature of the solution allows you to record straight into the system even as you are conducting due diligence. GRACE is also a document repository so all supporting information can be saved for reference.
GRACE’s workflows, calendars and dashboards will allow you to share, review and view with investment committees from the single source of truth.
Comprehensive checklists will enable looking at all aspects of due diligence for each organization being considered and used initial due diligence, site visits and ongoing monitoring to record findings against each aspect.Work assignments and responsibilities can help you manage and track.
Manage Comprehensive Information on Funds
- GRACE allows you to gather information on all of the prospective and current funds and keep them updated for a single source of truth for the organization
Set up Standardized Checklists
- GRACE allows you to take the best practice Alternate Investment Management Association (AIMA) checklists or create your own due diligence questionnaires and enhance it for any due diligence aspects you want to add for checklist for fund due diligence. It helps you copy and customize for various types of investments including Hedge funds,Private Equity, Real Estate etc.It helps you set up risk scores against each check list group and item as basis to score the information when due diligence is conducted.It also helps you set up standard checklists for site visits and on-going monitoring by type of firm
Investment Committee Reviews
- GRACE offers review functions for due diligence team to share information with investment committees and record their comments on the findings and documentation to finally arrive at the selection / rejection process and record the selection / rejection reasons.
Ongoing Monitoring of Investments
- GRACE provides functionality for ongoing monitoring of the firms in the portfolio. It offers calendaring facility and set up for ongoing monitoring items to be set up on each firm. These could be onetime or recurring tasks. Each event can also be assigned to task owners on whose individual calendars these task would show up. The system will also provide alerts on due dates to the task owners for their follow up with the firm , counter parties and vendors. The task owner can gather data including information and documents and add them to the GRACE system against the check.
- This process can allow them to receive periodic reports like NAV, Investors who have withdrawn, regulatory filings, investor disclosure and other documents as provided by the funds, save them in the repository and internally review , record issues and identify risks if any seen that need closer monitoring.
- This will allow early risk identification to take mitigation action and avoid portfolio losses. Mitigation tasks can be assigned and staff can report on the mitigation task status. It also shows trends in risks from operational issues that could otherwise be missed.
Analytics and Report Generation
- GRACE with its single source of truth can provide easy to use analytics on NAV trends, risk trends, investor trends etc
- Risk trends on vendors, counter parties and the organization’s exposures can be seen quickly
- Risk reports, data calendars, due diligence status, ongoing calendars, firms in the portfolio that are not providing proper reporting can be seen for followup.
- The analytics, charting and drill downs together give you a complete picture of state of each investment for early migitation of risks.
Conduct Initial Due Diligence
- GRACE helps you record all the information gathered from and about the firm into the central repository.
- This includes all the findings and documents received including due diligence information from third parties like fraud investigation, background checks, legal due diligence,counter party due diligence, vendor due diligence etc.
- It helps you create site visit checklists and record findings after site visits.
- It records risk levels to all the information gathered to arrive at a risk score for each firm and be able to compare organizations based on their risk scores.
Offers Online Portal for Fund Managers to respond to requests for Due Diligence
- GRACE offers Online Portal for Fund Manager, Vendors, Counter parties, Background check Third Party agencies and others to reply back to information requests from the due diligence teams.
- GRACE will send alerts to them when information requests are made and alert to the due diligence owner when information is received back
- Site visits are an important component of operational due diligence done by actually meeting people and verifying internal processes,service providers, compliance, fund administration and NAV calculation and investor reporting processes , understanding the key people and their investment management process. Reporting findings from site visits and identifying deficiencies as seen, is an important way of identifying risks early.
- GRACE allows you to set up Site visit plans, inherit from the standard site visit checklist and update it with additional items and checks that would be fine tuned to the particular visit.
- With its tablet / mobile interface, you can invoke the checklist during the visit and enter the findings right into the system during the due diligence exercise so as to capture all the information received. Findings can be analysed, risk rated and reviewed to get a picture of the organization
Periodic Data Load Functions
- GRACE provides functions for loading up Audit, NAV and other reporting information that the funds may be giving you in excel formats.
- GRACE provides both data load and data entry functions to facilitate the data to be brought into the system
Due Diligence Dashboard
- GRACE Operational Due diligence Dashboard is a powerful tool that allows the organization to get latest information on the prospective and current portfolio firms. Slice and dice by firm type,strategy, geography, fund currency, fund country, status of selection, by active firms, suspended firms, rejected firms along with drill down on the complete history of all data and documents on the firm until date provides valuable information. Data on site visits, risks identified, risk trends seen from ongoing data gathering, audit data from the single source makes it easy for zeroing on challenges with the firm right away
The Value GRACE can bring to your Operational Due Diligence
Visibility and Transparency to Risks
Investment risk in firms that have operational issues can be quickly identified so portfolio value can be protected
Standardization in Due Diligence Process
By creating standardization in the Operational due diligence process, firms where investments are being made can be comprehensively analysed for their strengths and weaknesses and investments can be adjusted accordingly to tap the strengths and mitigation undertaken to reduce weaknesses.
No need to gather information for Reviews
By having a single source of truth for analysis and risk oversight , investment committees can make informed decisions
Early awareness of Risk Trends
Trends of risk in various firms where you have investments, their vendors and counter parties can be very quickly identified with visual analytics , dashboards and drill downs and risk mitigation steps can be taken early
Single Source of Truth for the Organization
Will all documents, data, reviews, audit trails, analytics and easy to use queries and reports, GRACE becomes the central repository of the Single Source of Truth for the organization and avoids duplication and inefficiencies from trying to find out the latest information.
Tablet enabled, Mobile enabled system facilitates information availability and data capture at source
This feature enables the due diligence team to be empowered to have information on hand as soon as they need it, to refer back and look at previous interactions with the firm and ask the right questions
Risk reporting becomes Online and Real time
With an integrated web based access anytime anywhere, there is no need for risk reports to be generated in various departments to present to senior management. All that effort, costs and time can be saved.
Organization Ownership of Data
Organizations suffer when key risk and compliance staff leaves. The information is scattered if maintained solely by individuals and are lying on disks in various forms. GRACE becomes the single central repository of documents, data and processes enabling continuity even when key people leave the organization
Enormous Cost Savings
Enormous costs savings in unwanted labor for audits and examinations, avoid regulatory fines, legal costs, reputation risks and empowers the organization in managing risks.
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