Completing due diligence just got a bit like checking Facebook.
Compliance consultant TRACE Inc. unveiled its TRAC compliance platform today. The platform uses social media concepts to bring together a company’s compliance information in an easily shared profile.
The concept, said TRACE founder Alexandra Wrage, is to streamline lower-level due diligence functions, so companies can devote resources to more complicated screening of potential suppliers and partners.
Wrage is the sole shareholder of Trace Inc., a for-profit company associated with the non-profit corporate compliance membership organization TRACE International Inc., which Wrage also founded.
One nettlesome issue for companies and suppliers alike is the increasing use of third-party due diligence questionnaires. (see Just Anti-Corruptions’s 2010 report, Corporations Drowning in Third-Party Questionnaire Data.)
In the past, suppliers would have to complete individual due diligence questionnaires for each company — or even separate divisions within a company. Through TRAC, they can complete the system’s questionnaire and share it, along with additional documents, with as many business partners as they want.
“Previously these typically very small and often far-flung companies received dozens of due diligence forms asking the same questions over and over again,” Wrage said in an online conference this morning. “Now they can do this once, online, and make this information available to multiple companies.”
The system is the culmination of 10 years of TRACE research and benchmarking, Wrage said, and has been tested by user companies over the last year.
Wrage previously told Just Anti-Corruption that due diligence needs are expanding and companies are increasingly looking for a tool to screen multiple compliance issues at once.
Although TRAC, which stands for TRACE Registered Access Code, originally started as an anti-bribery screening platform, the system has expanded to include screening related to conflict minerals, trafficked labor, export violations and other emerging regulations.
“Anti-corruption has long led the list of reasons and motives to adopt a due diligence program, but increasingly we’re seeing additional risks from additional hazards that need to be scrutinized,” said Mike Ward, associate general counsel and chief compliance officer at Adobe Systems.
Adobe is part of the invitation-only TRAC Leadership Group, which will help TRACE shape the new system as it is implemented. Other members include Swiss engineering firm ABB Ltd., American Airlines, Barrick Gold, Home Depot and International Relief and Development.
Ward, who participated in the online conference, said the new platform lowers the barriers of entry for smaller companies that don’t have resources to develop robust compliance programs of their own.
Wrage said TRACE is committed to keeping the new system free for companies doing screening.
Profile holders will pay an $80 fee each year. The system is public, but individual profiles can be viewed only by invitation.
Once a company is linked to a partner’s profile, it will receive updates if the partner’s compliance status changes. Emelia Probasco, who is managing the TRAC platform, said the updating system is similar to notifications sent out by Facebook or LinkedIn.
TRAC requires profile holders to fully complete a diligence questionnaire and upload verification documents for review. The system screens company names against watch lists on a daily basis.
Companies that are matched with the watch list will have an “R” next to their twelve-digit ID number. So far, about 70,000 companies or consultants have been assigned ID numbers for the system during a testing phase conducted over the last year.
Joel Rogers, senior counsel over international, supply chain and regulatory issues at Home Depot, said the system benefits both companies doing the screening and the companies being scrutinized.
Due diligence verification can create a lot of work for suppliers, Rogers said, because of the duplication of requests and numerous compliance areas.
TRAC streamlines that, he said during the online conference, and eliminates the need for repetitive lower-end compliance screening, allowing the company to devote compliance resources to higher risk areas.
“We’re able to focus on the part that I think is more important for us in our vetting process,” Rogers said.
Membership with TRACE International is not required for companies or consultants to use the TRAC system.
For large and small companies alike, the idea is to simplify and reduce resources needed for standard due diligence.
“One of the most daunting problems is the number of partners that a complex multinational can do business with,” Ward said. “You need to focus your resources on your highest risk partners.”