Top Due Diligence Analyst best practices

Posted by Andrew Borowiec on Nov 29, 2017 9:03:00 AM

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What are the top due diligence analyst best practices you simply can’t be without if you’re to be successful in your role? What are the essential skills and knowledge that allow you to perform at your peak? Well, we asked over 200 practitioners to rate the importance of different parts of the job and now we can share that with you.

Where our due diligence best practices data comes from

When we were compiling the content for our definitive CDDA qualification, we undertook a rigorous content verification process that included a practice analysis survey.

The survey was completed in full by over 200 practitioners and consulted them on the relative importance of a whole host of potential course topics. These were grouped into general knowledge (investment structures), general skills, investment due diligence and operational due diligence.

Below we’ll reveal the top 3 practices from each survey area and we also invite you to explore the survey results in more detail by downloading your own full copy.

Know your investment structures

More than half of surveyed due diligence analysts believe that it is extremely important to have an understanding of private equity (55%) and hedge funds (52%). It is worth noting that these are also the two most common financial investment types managed by survey participants. So, we can conclude that knowledge of the financial investment type that you currently manage is essential.

Additionally, at least 70% of respondents indicated that knowledge of venture capital (76%), private credit (72%), registered investment vehicles (70%), and marketable direct investments and separate accounts (70%) is important or extremely important.

Make sure your skills match up

There are a whole suite of skills that are considered essential for due diligence analysts to be effective in their role. These include verbal and written communication, research, analysis, independence, professional skepticism and problem solving. More than 80% believe that it is important or extremely important for due diligence analysts to possess each of these skills.

In particular, the majority indicated that it is extremely important that due diligence analysts are able to analyze and make sense of data (78%), maintain independence (67%), conduct research (58%) and effectively communicate in writing (58%).

Investment due diligence best practices

To gather this data, due diligence analysts were asked to indicate how important the performance of various responsibilities were to proficiency in their role, or similar roles.

The top 3 areas for were thought to be:

  • Identify, collect & review relevant materials: 89% of respondents thought this was either very or extremely important.
  • Evaluate and monitor portfolio: 90% of respondents thought this was either very or extremely important.
  • Evaluate and monitor investment performance: 91% of respondents thought this was either very or extremely important.

See which elements of each of these 3 areas due diligence analysts thought were most important to review, evaluate and monitor in the full report.

Operational due diligence best practices

To gather this data, due diligence analysts were asked to indicate how important the performance of various responsibilities were to proficiency in their role, or similar roles.

The top 3 areas for were thought to be:

  • Identify, collect & review relevant materials: As with investment due diligence, 89% of respondents thought this was either very or extremely important. 
  • Observe and/or evaluate key operational processes: 90% of respondents thought this was either very or extremely important.
  • Evaluate and monitor investment management firm: 89% of respondents thought this was either very or extremely important.

See which elements of each of these 3 areas due diligence analysts thought were most important to review, evaluate and monitor in the full report.

Find out more about what your peers think is most important to know and do, plus how often they actually do them. Download the full survey report here and get the full picture on due diligence analyst best practices.

Download the Due Diligence Survey Report

Tags: Due Diligence

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