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Rising risk leads to greater need for visibility and control

Investors are calling for greater visibility into their portfolios, as well as more control, fuelled by political and economic instability, and volatile markets. Due diligence is of the highest priority as investors seek to mitigate risk and identify stable and reliable general partners (GPs) to work with.

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Investors are calling for greater visibility into their portfolios, as well as more control, fuelled by political and economic instability, and volatile markets. Due diligence is of the highest priority as investors seek to mitigate risk and identify stable and reliable general partners (GPs) to work with.

“Limited partners (LPs) are working hard to minimize risks wherever they possibly can and operational due diligence is one of the ways they can identify and mitigate risks,” says Louise Verga, managing director, Diligend.

The firm has even heard instances of funds being returned as they haven’t been deployed, which is a risk that ODD could potentially identify. “There have been some high profile failures and scandals very recently which most LPs wish to avoid at all costs. It sounds obvious, but again, ODD can really help here. All the scrutiny from LPs leads to a trickle down pressure on GPs who are coming to us for a solution to help manage the myriad of inbound investor requests they receive,” Verga says.

The focus on mitigating operational risk has been driving growth at Diligend, given there is a greater need for the firm’s solutions to manage risks and increase transparency into funds and portfolio companies. 

Verga explains how the firm has this year introduced  Diligend Respond to help GPs and other asset managers respond to multiple data requests, quickly, accurately, consistently, without a lot of manpower: “We are focused on how we can make their workflow streamlined, for example by allowing them to use our tools directly within the file formats they receive from the investor. This removes the necessity to recreate DDQ and RFP responses over and over again. 

“We’ve embedded automation and machine learning to suggest the most appropriate response to any and every question, with time stamps and creator details so the whole response can be checked quickly and verified before sharing with the LPs. Responses can still be customized and creative, but the mundane, repetitive element is gone.”

There are also growth opportunities on the LP front as the investors’ need to analyze and actively use the information they collect during their due diligence exercises. This analysis can be used to positively inform decision-making and investment strategy. Verga comments: “Too often we see LPs collect data, check it and file it away forever. We think there is a big opportunity to use due diligence in other places and by other departments.”

In another area of high growth for Diligend, the increasing focus on sustainability has also resulted in an uptick in enquires about Diligend Collect for ESG, particularly from LPs and GPs in the private markets. “Both LPs and GPs are looking for ways to not only collect ESG data, but to standardize it and make it comparable. As new standards and frameworks emerge, it is important that LPs and GPs can collect data that is meaningful to them and meets the requirements of the frameworks and regulations they are working towards. Diligend is unique in that that we can help collect ESG data at the fund and portfolio company level. If clients can define the data they need, they can use Diligend to collect, organize and understand it,” Verga concludes.


Louise Verga, managing director, Diligend – Louise is an investment sector professional, with over 15 years’ experience gained across the buy and sell side technology space. As Managing Director of Diligend, an innovative digital due diligence platform, Louise works closely with clients in banks, family offices, hedge funds, asset managers, pensions and insurance companies to help them streamline and automate due diligence and monitoring data collection and analysis. Working internationally in the UK, Italy, Switzerland and the US gave Louise a solid view of the global fintech space and the criticality of sound data to maintain compliance and inform investment decision making. 
 

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