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Alternative Investment Firms: Screening Vendors with DDQ

2 min read

Whether you are a seasoned hedge fund manager or spinning up a new firm, the ever-shifting IT and cybersecurity landscape is worthy of your concern. With every passing day, malicious parties are finding new ways to threaten your security and commit financial fraud within the industry.

The number one cause of security breaches within alternative investment firms is phishing – which is easily preventable if your employees have proper training so that they can recognize attempts.

Why a DDQ Matters

However, the second most common cause of a security breach is through your vendors. Ensuring all your vendors are digitally secure is a daunting task, but it can be made easier with an effective due diligence questionnaire (DDQ).

A DDQ is a standardized means of auditing your operational safeguards, overall data security, and compliance measures. For small investment firms, it may not be feasible to have a comprehensive DDQ developed in-house, which is why it may be worth considering a third-party IT and cybersecurity expert, such as Agio.

Having a DDQ on-hand does more than help ensure your digital security. It’s also an attractive measure of safety for potential investors. Agio helps by delivering a comprehensive technology and cybersecurity-focused DDQ to share with your investors, as well as support for any of their in-depth questions that may arise.

Screening Your Vendors

A critical part of a proper DDQ is a pre-packaged, comprehensive vendor examination. This deep dive offers you valuable insight into the financial, legal, operational, and cybersecurity status of each of your vendors. This vetting process includes an examination of your vendor’s due diligence procedures and how they protect data, so you can understand exactly what information is at risk and how it affects your firm.

It’s important to point out that completing and managing the vendor DDQ process takes significant time and effort. A well-structured DDQ will eventually streamline processes and operations that occur between both firms.

For example, sending trade settlement information downstream to accounting may require just an account identifier — not a client’s name, phone number, and social security number. Cutting down on information sent over makes processes more efficient while lowering the amount of sensitive data that can be exposed.

Why Agio?

When choosing a third-party vendor, experience matters. Agio’s specialized focus on providing alternative investment firms with technology and cybersecurity solutions makes the DDQ process second nature. Risk mitigation is woven into Agio’s DNA, which is why we place so much emphasis on our DDQ process. Work with Agio so that you can focus on attracting new investors and the performance of your fund.

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