In today’s high-stakes deal making environment, yesterday’s due diligence background checks that rely on simple Google searches and personal references won’t cut it. What’s more, the COVID-19 pandemic has demonstrated that investors can’t always rely on in-person interaction to evaluate potential business partners, and thus, risk management solutions need to hold up even when exchanges happen online.
When allocating significant capital to an individual or company, investors need to make sure they are placing their trust in worthy hands. This requires conducting pre-investment due diligence that goes beyond the standard DDQ and takes an in-depth look at company executives. However, the proliferation of data has made it more difficult than ever to run these screenings in a timely and accurate manner.
The challenges associated with performing comprehensive background checks that meet the current needs of fund managers have led to the use of technology in the background check market.
In a recent conversation with Shlomo Mirvis, CEO and co-founder of Intelligo, an AI-powered background risk intelligence platform for investment due diligence, he highlights what he sees as one of the major challenges in conducting background checks in the current financial landscape.
“Performing an effective background screening means leaving no stone unturned, despite the sheer quantity of data being produced today. So when running a background check, the question becomes, how do we parse the massive amount of data available and do so quickly, to limit any delays in making investment decisions,” he noted.
Bearing this in mind, more and more investment firms are exploring advanced technology solutions that utilize artificial intelligence (AI). Mirvis points out AI has the ability to quickly analyze thousands of data sources. He added, “AI’s ‘superpower’ is that it can understand and analyze data, regardless of the document type, language, or jurisdiction, which used to be limiting factors in traditional due diligence investigations.”
While analysts are only able to cover so much information given human limitations, AI can analyze a large number of sources in a matter of minutes, resulting in a greater depth of coverage.
There is another challenge that comes to mind when discussing these large quantities of data. “Background checks don’t bring any value if they just present a regurgitation of data. The information should be presented in a clear and contextualized way, enabling the reviewer of the background check to come to a sound conclusion,” Mirvis said.
For example, background checks run by human analysts on individuals with common names like “John Smith” could be less accurate as it’s difficult to distinguish between the subject and thousands of other people with similar names. AI, however, can extract only the relevant data and deliver the most reliable and accurate results.
When choosing the right AI-based solution, there are several factors that need to be taken into consideration, says Mirvis. “First and foremost, firms need to ask themselves, what information is being included in these checks? Are both public and paid sources included? How many sources does the solution use? What is the solution’s geographical coverage? These are the types of questions that you need to ask when evaluating different solutions on the market.”
There’s also the question of how quickly a solution can deliver the necessary background check reports so that funds can make timely investment decisions. Given the speed at which AI can process data, turnaround times for background checks have been significantly reduced. As investment professionals don’t have time to spare and are under pressure to close deals as quickly as possible, AI is able to produce background check reports much faster than industry standards.
In many cases, there’s more than just one person that’s responsible for managing all of the pre-investment due diligence. With this in mind, Mirvis notes that it is important to find a solution that enables company or team-wide collaboration.
The addition of AI-powered background checks not only streamlines the pre-investment due diligence process but also provides firms with the confidence that they are making the most informed business decisions.
Mark Borkowski is president of Mercantile Mergers & Acquisitions Corporation is a mid-market mergers & acquisitions brokerage firm based in Toronto. Mark can be reached at (416) 368-8466 or at .(JavaScript must be enabled to view this email address)
In today’s high-stakes deal making environment, yesterday’s due diligence background checks that rely on simple Google searches and personal references won’t cut it. What’s more, the COVID-19 pandemic has demonstrated that investors can’t always rely on in-person interaction to evaluate potential business partners, and thus, risk management solutions need to hold up even when exchanges happen online.
When allocating significant capital to an individual or company, investors need to make sure they are placing their trust in worthy hands. This requires conducting pre-investment due diligence that goes beyond the standard DDQ and takes an in-depth look at company executives. However, the proliferation of data has made it more difficult than ever to run these screenings in a timely and accurate manner. 
