The term originally comes from the Anglo-American legal system and has been established internationally as the standard for important checks – from company acquisitions and investment decisions to ongoing business partner checks in the context of compliance.
Definition
What types of due diligence are there?
Due diligence takes several forms, depending on the context and scope of the review. In the context of corporate transactions (M&A), the following audits are particularly common: financial reviews to analyze economic and financial situations, legal assessments to evaluate regulatory and contractual risks, tax examinations to uncover fiscal liabilities, and commercial analyses to assess market position and business models. In addition, IT, HR, and environmental reviews are becoming increasingly common.
In the regulatory space, one discipline has become essential: compliance due diligence. It checks whether business partners, suppliers, or target companies meet requirements in areas such as anti-corruption, money laundering, sanctions, or ESG. For companies operating internationally, this form of structured risk assessment is indispensable today.
Compliance due diligence
Focus on business partners
Business partner screening is a top priority for compliance professionals today. Also known as third-party risk management, it involves the risk-based screening of suppliers, distribution partners, agents, and other third parties throughout the entire lifecycle of a business relationship.
Typically, the compliance process includes checking sanctions lists, screening against PEP databases and watch lists, analyzing adverse media, and assessing country and industry risks. The risk-based approach ensures that the scope of the review corresponds to the actual risk profile of a business partner – from a simple initial review to in-depth enhanced due diligence in high-risk cases.
The pressure to set up these processes is growing. Regulators are setting increasingly specific expectations for traceable, well-documented review processes. Those who still manually perform due diligence today will quickly reach their capacity limits.
Beyond the basics
The regulatory landscape
A growing body of national and international regulation underpins today’s due diligence obligations. At the EU level, the CSDDD (Corporate Sustainability Due Diligence Directive, Directive (EU) 2024/1760) is the central framework: It obliges large companies to identify, assess, and address human rights and environmental risks in their value chain. Timelines have been adjusted multiple times as part of the EU Omnibus Package. Member states must now transpose the directive into national law by July 2028. Companies in scope, currently those with more than 5,000 employees and over EUR 1.5 billion in net turnover based on the December 2025 trilogue agreement, must comply from July 2029.
In Germany, the Supply Chain Due Diligence Act has provided the national framework for due diligence obligations in the supply chain since 2023. It is expected to be amended in the course of implementing the CSDDD. Internationally, the US Foreign Corrupt Practices Act (FCPA) and the UK Bribery Act also shape the requirements for due diligence processes around anti-corruption.
Going digital is a necessity
From manual process to platform
Considering increasing regulatory requirements and growing business partner portfolios, manual due diligence processes are reaching their limits. Spreadsheet-based checks, email workflows, and decentralized document storage create inefficiencies, sources of error, and gaps in the audit trail.
Digital platforms address these challenges: they automate recurring check steps such as sanctions list comparisons and risk analyses, ensure a fully auditable trail, and scale reliably even with thousands of business partners. AI-powered capabilities, such as ESG AI agents for adverse media analysis, detect red flags in real time and relieve compliance teams of repetitive tasks. The result: more capacity for informed risk decisions instead of manual data entry.
Compliance Solutions’ Third Party Risk Management System demonstrates how such a digital due diligence process works in practice with workflow-driven review processes, integrated risk management, and AI-powered analysis.
Looking for a due diligence solution that fits your requirements? The Third Party Risk Management System from Compliance Solutions supports DAX and Fortune 500 companies in risk-based business partner verification – automated, audit-proof, and enterprise-ready.
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