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Investment and Operational Due Diligence: Using technology to streamline the process

A key consideration of many asset owners is the appointment of external investment managers to manage a large pool of their assets and partner across a range of asset classes. 

Many clients face challenges with their current investment and operational due diligence (IDD / ODD) processes. Activities like assessment, selection, on-boarding, and managing on-going relationships with investment managers tend to be largely manual. Typically this creates barriers for collaboration across the range of teams that are involved, or have an interest in the process, and the information collected from investment managers typically lacks centralised and common storage of investment manager data and documentation.

The investment managers that participate in these selection processes also face challenges in swiftly responding to the questionnaire process due to receiving multiple questionnaires in multiple formats from their client base, often not having a centralized store of responses and having issues in ensuring consistency in responses across multiple time periods.

These challenges are only growing as the regulatory environment evolves and the complexity of information required across the industry increases.

At Shoreline, we have discovered a better way to manage investment and operational due diligence process by incorporating technology that sits outside of the asset management industry.

Firms should recognize the need to automate and simplify their IDD/ODD processes to achieve efficiency gains and to improve workflows across the organisation. Benefits can be achieved by automating the full IDD/ODD process from digitizing their questionnaires to automating delivery, scoring and evaluation.

The solution to these challenges is the utilisation of technology platforms that cannot only automate the full IDD/ODD process, but also provide analytics and risk insights through automated scoring algorithms and extracting and normalizing unstructured data from due diligence questionnaires.

Shoreline recently completed a client engagement with a large asset owner with over fifty external investment managers to monitor and manage. The scope of the engagement was to identify a preferred technology solution and develop workflows that would provide a significant operational uplift of the investment manager investment and operational due diligence process.

The outcome of the engagement was a technology solution that fully automated the complete IDD/ODD process providing a significant uplift from both the client and their investment manager’s perspective. The recommended solution provided efficiency uplifts in the following areas:

  • Full ODD Process Automation
    • Use of standard templates and upload of proprietary questionnaires. Schedule upcoming DDQs and automate publishing. Customize scoring framework. Workflows for internal delegation. Production of reports by automatically extracting data from questionnaires.
  • Centralised Information Management
    • Functionality to extract & normalize data from questionnaires and populate manager databases. Sort and filter manager and fund data by multiple criteria. Provide search capabilities including within documents. Internal and external collaboration.
  • Dynamic Dashboards & Detailed Analytics
    • The provision of scoring dashboards at manager and fund level. Dashboards to track progress of questionnaires, issues, and assignments. Dashboards offering drill down and filtering capabilities. Detailed analytics and reports to gain insights, highlight risks & exceptions. Ability to run cross-manager and time-series reports.
  • Platform for Investment Managers to Respond & Manage Questionnaire Process
    • The provision of a portal to provide investment managers a consolidated view of all incoming questionnaires. Investment managers can delegate section and questions within their organization. Investment managers can publish pre-filled standard questionnaires. Investment managers can publish on-going documents with full control

If your firm is facing similar challenges with the IDD/ODD management process Shoreline can help. With a cross-section of expertise in investment and operational due diligence systems selection and implementation we have the necessary experience required to work with you to transform these functions.

Please contact us if you require further information.

Chris Robertson
Associate Director

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