The Shared Assessments Program, the member-driven leader in third party risk assurance, today issued “Using TPRM Best Practices to Improve M&A Outcomes,” a new best practices resource for the investment banking, innovation, C-Suite, Board of Directors and risk management communities. The report is issued in response to the growing need in Merger & Acquisition (M&A) environments for enhanced, timelier and more substantive risk-related due diligence. Shared Assessments also issued survey findings related to risk management professionals’ experience with M&A outcomes.
The report details how post-acquisition valuations can be protected and integration can be improved by applying the third party risk management (TPRM) lens, tools and techniques to M&A discovery processes. TPRM is agile enough to be used in M&A and allows for examination of a degree of incremental risk that may otherwise be overlooked. This level of examination identifies a wider range of risks deeper in the supply chain than is typically achieved in M&A due diligence.
“Now more than ever, it is crucial to evaluate M&A targets for both operational risks and for resilience against external threats. Due diligence teams must look at both the known risks such as business operations, and a new and broader set of technological, human resources, cyber and physical security, and business continuity issues,” said Shared Assessments CEO David J. Perez.
“M&A diligence teams may not be attuned or equipped to evaluate these issues because they don’t recognize that the target is, in fact, a third party to the acquirer. In contrast, TPRM teams are highly skilled at surfacing the exposure to potentially problematic issues,” said Bob Jones, Senior Advisor, Shared Assessments. “Risk professionals discover and evaluate the broader scope of risks that exist across an organization’s extended ecosystem, whether directly related to lines of business or triggered by external and even societal forces. M&A initiatives that leverage TPRM analyses are far less likely to experience associated problems that linger long after the deal has closed.”
Shared Assessments’ new analysis, “Using TPRM Best Practices to Improve M&A Outcomes,” specifically illustrates how the use of TPRM tools and techniques in a team-based approach helps achieve:
- Unprecedented Efficiency: Information gained through adopting this approach can be expected to improve the efficiency of M&A due diligence, inclusive of continuous monitoring.
- Greater Transparency: Deeper insight provides an improved understanding of risks (e.g., target company’s geo-footprint, financial standing, use and connections to Nth Parties and other essential intelligence).
- More Timely, Effective Insight: Incorporating TPRM best practices into due diligence reveals potential issues early in the deal, exposing latent integration issues that can guide deal action plans.
In addition to business operations, TPRM programs evaluate the potential target organization’s exposure to risks and impact of climate change, insider malfeasance, money laundering, human trafficking issues, and sourcing issues stemming from political upheaval or public health crises, for example. TPRM programs also support less obvious merger environment concerns, such as security and fraud issues that can increase as a result of heightened organizational uncertainty and employee stress.
The briefing guide supports M&A teams and senior executives in identifying and bringing to the table the right people, processes and tools to optimize the effectiveness of the due diligence process. The guide:
- outlines specific TPRM best practices that can help substantially lower risks in M&A settings;
- discusses both acquirer and target viewpoints, enabling teams to more quickly identify key issues that may impede a deal;
- provides how-to guidance for integrating TPRM policies, processes and technologies into M&A settings throughout the deal; and
- includes two practitioner Guideline Tools that can be readily tailored to the needs of the organization.
Pre-M&A Survey Results: Risk Practitioners Weigh In
Shared Assessments also released results of its survey of 185 risk professionals. These results found that of the 51% of respondents who had been involved in an M&A situation, only 38% discovered substantial compliance gaps and due diligence risks long before the deal closed. These numbers underscore the effectiveness of TPRM analysis as a key component of pre-M&A due diligence.
To download a copy of “Using TPRM Best Practices to Improve M&A Outcomes” please go to https://sharedassessments.org/blog/using-tprm-best-practices-to-improve-ma-outcomes/.
About the Shared Assessments Program
As the only organization that has uniquely positioned and developed standardized industry resources to bring efficiencies to the market for enterprise risk management for more than a decade, the Shared Assessments Program has become the trusted source in third party risk assurance. Shared Assessments offers opportunities for members to address global risk management challenges through leadership, best practices, tools, training and special interest groups. Join the dialog with peer companies and learn how you can optimize your compliance programs while building a better understanding of what it takes to create a more risk aware and resilient environment in your organization. www.sharedassessments.org