Focused Analysis for High-Risk Areas

 When you're considering an investment or acquisition, it's important to conduct due diligence to identify potential risks and uncertainties. While a Comprehensive Due Diligence process can provide a thorough evaluation of the target company, it may not be necessary or cost-effective for every situation. That's where our Red Flags Due Diligence comes in.

 

Our team of experienced professionals conducts a focused evaluation of high-risk areas in the target company, providing a report of findings and recommendations to help you make informed investment or acquisition decisions.

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Our Red Flags Due Diligence Process

 

Planning and Scoping

Identifying key stakeholders, gathering initial requests for information, and defining the timeline and scope of the project. 

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People

Evaluating background and skills, policies and procedures, budget management, and portfolio management where the portfolio is defined as the strategic projects or initiatives. Examples of high-risk areas include:

• Key personnel with inadequate experience or expertise

• Weak or ineffective policies and procedures for risk management, compliance, or governance

• Budget overruns or underperformance of strategic initiatives

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Business Processes and Applications

Evaluating critical financial, technology, and operational processes throughout the business, including Quote-to-Cash, Procure-to-Pay, Record-to-Report, Demand-to-Available, Available-to-Delivery, and Hire-to-Retire cycles. Examples of high-risk areas include:

• Inadequate controls or weak data quality in critical financial processes, such as revenue recognition or accounts payable

• Lack of automation or digitization in key operational processes, such as inventory management or order fulfillment

• High frequency of errors or exceptions in critical technology applications, such as ERP or CRM systems

 

Technology and Cybersecurity

Evaluating software architecture, scalability, reliability, extensibility, code quality, use of frameworks, use of cloud services, and DevOps cycles including Continuous Integration/Continuous Deployment (CI/CD). Examples of high-risk areas include:

• Inadequate or outdated cybersecurity controls, such as weak passwords or lack of encryption

• High vulnerability or susceptibility to cyberattacks, such as unpatched software or misconfigured cloud services

• Poor scalability or reliability of critical systems, such as payment processing or customer data management

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Infrastructure and Operations

Evaluating data center, disaster recovery/business continuity, ITIL standards, desktop/client management, asset management, end-user support, etc. Examples of high-risk areas include:

• Inadequate or non-existent disaster recovery or business continuity plans

• Poor asset management, such as incomplete inventory or lack of tracking

• Insufficient end-user support, such as long wait times or poor responsiveness to issues

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Risk Management

Evaluating the risk management program, controls, security, privacy, financial, medical and other compliance standards (e.g. CMMC, GDPR, PCI-DSS, etc.). Examples of high-risk areas include:

• Lack of clear or effective risk management policies or procedures

• Significant or frequent non-compliance with industry or regulatory standards, such as HIPAA or PCI-DSS

• Significant or frequent security or privacy incidents, such as data breaches or unauthorized access

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Reporting, R&W & Deal Closing

Providing a comprehensive report of findings, including recommendations for mitigating identified risks and improving the organization's performance. We collaborate with the legal team, assist with negotiations, and provide ongoing support as needed to ensure a smooth transition post-transaction, including support during Representations and Warranty insurance meetings.

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