Third party due diligence is big business. For companies, third party due diligence begins by considering a business relationship with a third party. The third party will perform some sort of service that the business either cannot or does not want to perform itself.
The due diligence process typically begins before the company decides to enter into the relationship as various third parties are screened for price, customer service, and other business reasons. After the business decides to hire the third party, the company ideally collects additional compliance information—usually with some sort of questionnaire.
These questionnaires include all sorts of data points related to the compliance risk posed by the relationship—ranging from information on foreign officials working at a particular company to the company's trade compliance program. Some of the questionnaires have become ridiculously long, riddled with legalese, and collect data that is not necessarily relevant to a particular compliance risk posed by the relationship.
As your organization seeks to develop a risk-based compliance program and effectively address third party risks, we have provided five rules to assist you in revising your compliance questionnaire:
Rule 1: Avoid Legalese
Don't draft your questionnaire so it looks like a law school exam or like it’s excerpted from the Code of Federal Regulations. Chances are the person filling out your due diligence form is not a lawyer. He or she may not know what your legal and compliance jargon means. If you want good answers, ask good questions.
Rule 2: Be Reasonable
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