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Due Diligence Matters - November 2023

Comment: perfORM due diligence and monitoring on your service providers – time for an ODD practitioner-led approach?

Our line of work allows us significant insight into the operational challenges faced by allocators, investment managers and service providers all over the world. This, in turn, can inform us of trends, themes and even operational risk hot spots on the horizon. One such trend is bringing service provider (“SP”) due diligence back onto the agenda, and a move towards engaging third party operational due diligence (“ODD”) providers to help assess, understand and, therefore, mitigate, the risks associated with the use of SPs, including poor performance, poor service and financial, reputational, business continuity, technology, compliance and governance risks.

For our clients, SPs include fund administrators, custodians, prime brokers, exchanges, banks, IT vendors (hardware and software), compliance/regulatory consultants, hosts/platforms, data providers, lawyers, insurers, HR, payroll, tax, audit, background checking services, etc. In addition, there is a trend for clients who use vendors which produce alternative data sets to apply a greater level of scrutiny.

McKinsey highlighted the risks relating to third party risk management (“TPRM”) back in 2017 and the FCA reminded firms in 2020 that, while activities can be outsourced, ultimate responsibility and accountability cannot. TPRM is a long-established discipline, and drivers for the current refocus include fiduciary duty, regulatory scrutiny (e.g. Central Bank of Ireland, CSSF and SEC), headline-grabbing operational risks like cyber security and increased expectations of clients, including those of their third-party ODD providers, when utilised. In addition, firms are seeking a better understanding of fee competitiveness, as well as how SPs have delivered against their SLAs.

With such a range of SPs and associated operational risks, the already-busy C-suite can engage perfORM to deliver a ‘Third Party Service Provider Due Diligence Report’. The benefits of working with us include:  

  • Timely delivery. We aim to deliver our reports in six to eight weeks.
  • Relevant reports. We work with our clients to understand their risk appetite and ensure that the scope of the report is relevant. As a result, the report can be a useful tool in the decision-making process regarding whether to appoint, terminate, renegotiate with or extend the role and services of the SP.
  • Cost-efficiency. Our clients only pay for what they consume, i.e. a unit price rather than a subscription fee.
  • Access to our expertise and our many years of experience performing independent due diligence on SPs. SPs also benefit from this, which streamlines the process, as our level of understanding reduces the amount of the SP’s time and resource required to complete the due diligence.
  • Inclusion of enhanced background checks on entities and key individuals, covering ultimate beneficial ownership, regulatory screening, media coverage, and criminal history.

Please contact us for a sample Third Party Service Provider Due Diligence Report.

 

ODD Report Solution

Our ODD Report Solution is not just another tick in a box, it is an innovative approach to operational due diligence. A pragmatic solution for Investment Managers and Service Providers which engage us to complete an ODD review. In addition to the below, we currently have a growing number of clients in progress. 

  • Investment Manager: Wincent Capital Management Limited – please contact here to request access to our September 2023 dated ODD Report
  • Investment Manager: Hivemind Capital Partners UK LLP – please contact here to request access to our September 2023 dated ODD Report
  • Service Provider: Cloudwall Capital, Inc – please contact here to request access to our August 2023 dated ODD Report
  • Investment Manager: Old Street Digital Limited – please contact here to request access to our April 2023 dated ODD Report
  • Virtual Asset Service Provider: Copper Technologies (Switzerland) AG – please contact here to request access to our March 2023 dated ODD Report
  • Investment Manager: Hyperion Decimus, LLC – please contact here to request access to our March 2023 dated ODD Report

About perfORM

perfORM Due Diligence Services is an award-winning, multijurisdictional UK (London), Switzerland (Geneva) and the USA (NYC) and standalone Operational Due Diligence solutions provider with 100+ years of collective ODD experience.

We have a large coverage of ODD Reports that can be accessed off the shelf without subscription – please contact us for more information or to receive a sample ODD Report.

Missed the last e-bulletin? Click here for the October 2023 edition.