As 2023 unfurls before us, we take a look back at the landscape for due diligence practitioners in 2022 and consider five potential due diligence trends for the year ahead.
1. The value of due diligence will grow
The dramatic FTX collapse and the more recent Frank scandal are stark reminders of the real value of due diligence. And as the recession bites, establishing reputations and identifying compliance red flags takes on a whole new meaning. Combine this with a continued regulatory focus on responsible business conduct and human rights and it’s clear that all eyes will be on the depth of due diligence and quality of risk assessment being conducted.
Europe leads the way on this with German businesses required to comply with the Supply Chain Due Diligence Act from the first of January this year and further Europe-wide regulations expected in 2024. But legislation is not the only driver of due diligence. Stakeholders continue to demand more of businesses in 2023 with the ESG agenda still taking centre stage. And with greenwashing scandals making society as a whole more aware, customers and employees are demanding change. The time for a tick box exercise has well and truly passed and due diligence now has real value.
2. Verifying beneficial ownership is going to take more time
Identifying a company’s ultimate beneficial ownership (UBO) has never been easy but the recent ruling from the Court of Justice of the European Union seems to be closing the door on simplified access to UBO data. Registry information is often incomplete, fragmented and sometimes unreliable. In some cases, the information needs to be contextualised or validated, necessitating local on-the-ground sources. We will surely see an increase in this approach to increasing the complexity of verifying beneficial ownership in 2023.
3. The line between real and fake information is more blurred than ever
2023 is likely to see a proliferation of deepfake audio and video causing significant concern for compliance teams round the world. How can teams realistically filter out fake information in a world in which AI can produce content that convincingly shows people saying or doing things they never did, or creating personas that never existed in the first place? Couple this with the ever growing knowledge of how the UK Companies House has been misused and the challenge of accessing legitimate information is likely to remain this year (🤞 fingers crossed for Companies House reform later in the year). Making the most of new and developing tech tools will be crucial to keeping ahead of disinformation.
4. Tech partnerships will change your processes
There are a plethora of outstanding technology solutions on the market to streamline different aspects of the due diligence process. But despite significant leaps in the last five years, there is no single, all-encompassing due diligence solution as yet. While this might seem like a problem, the opportunity for 2023 lies in creating tech partnerships that truly address your specific use case. Don’t box yourself into a solution that doesn’t solve your business's challenges. Instead why not get your preferred technology partners round a table and see how together they can streamline your processes and deliver the best UX (oh hey 👋 drop us a line here)?
5. AI will free up smart people to do smart work
The growth of AI in 2022 was astonishing and in the last month of the year it was near impossible to avoid hearing about ChatGPT, the most advanced chatbot yet. Type in a question/task/piece of code and watch it generate human-like responses.
What does this have to do with due diligence you might ask? Well as the example above highlights, AI has its limitations and still needs to be complemented by irreplaceable human intelligence. Yes it can look at bulk volumes of historic data but it can’t make complex future predictions without human input AND it doesn’t have all the answers (and in due diligence, we like all the answers!).
In the compliance context, AI is already creating huge efficiencies, especially on simple tasks. It empowers compliance teams by taking care of many of the mundane tasks and opens the way for proactive, forward-thinking work that truly targets the most complicated risks. Putting humans in the loop to resolve the most complicated scenarios creates maximum impact, especially when it comes to enhanced due diligence. By using human intelligence and skills on your highest risk processes you can be confident that you are putting your best resources where it matters most.
With a community of 1500+ intelligence sources in 250+ jurisdictions, the Ground Truth Intelligence platform helps you access hard-to-get data and intelligence when you need it most. Get in touch today for more information.