Undertaking Due Diligence – Guidance and FAQs
The following guidance and Frequently Asked Questions (FAQs) outline when due diligence checks on third parties are necessary, how to use the Research Third Parties: Relationship Review Questionnaire [Word] and what to expect from the Research Office's independent risk assessment process.
Partner Due Diligence
1) Why are third party assessments necessary?
When working with third parties (UK and overseas), it is important that a risk assessment is undertaken before an award is accepted. Many of the College's main funders require lead institutions to carry out due diligence checks on all third parties who undertake activities funded by a research grant or contract. If Imperial is a research partner and is planning to transfer funding to other third parties, there is still a requirement to conduct due diligence checks on each third party associated with Imperial’s part of the project. While each institution will determine its own appetite for risk, funders expect to see a clearly documented internal process for identifying, assessing and mitigating risks. This is good practice for any organisation regardless of funder specific requirements.
It is recommended that relationship reviews are also undertaken for existing as well as new third party organisations.
2) Research Third Parties: Relationship Review Questionnaire
Drawing on the College’s Relationship Review and Conflict of Interest policies, as well as external funder guidance, the Research Third Parties: Relationship Review Questionnaire has been designed to help PIs to consider a broad spectrum of financial, reputational, ethical, safeguarding and geo-political risks involved in establishing research relationships. It includes comprehensive guidance notes which explain the meaning of each question and includes links to related College policies and advice on what to look for. The questionnaire should be completed by the Principal Investigator (supported by their Department) with the direct input of the third party organisation. A separate questionnaire should be completed for each third party associated with the project.
The questionnaire should be completed as soon as the relationship is established and before an award is accepted so any mitigating actions can be taken, such as making appropriate changes to the research sub-agreement and the Department’s project management plan.
3) Completing the Research Third Parties: Relationship Review Questionnaire
PIs and Departments should work with the third party organisation to complete the Research Third Parties: Relationship Review Questionnaire which asks for project details and considers the following risk areas:
- Financial probity.
- Nature of the third party relationship and ability to deliver.
- Ethics and integrity.
- Political, economic and geographical risk.
- Additional information that may affect the project's aims.
As part of the relationship review process, you should consider how suitable the third party organisation is to deliver the proposed work. This can also help to strengthen the case for support on the research proposal so it is important to explain:
- How the relationship with the third party organisation was established?
- Why they are the most suitable third party organisation to undertake the work?
- How you intend to develop the third party relationship and monitor their project deliverables?
Completed questionnaires should be sent to firstname.lastname@example.org for independent assessment by the Research Office.
4) Research Office risk assessment process
The Research Office risk assessment process is summarised as follows:
- A risk score is calculated for each section of the questionnaire leading to an overall Low, Medium or High risk rating.
- The College’s standard risk assessment criteria is used to determine an approproate score for impact and likelihood. Impact refers to the consequences if the risk occurs and Likelihood is the probability of the risk occurring.
- A summary of the risks identified and any recommended mitigating actions will be provided to the PI, Department, Faculty Research Services and Faculty Contracts.
If a third party is considered very high-risk, the matter will be escalated to the Director of the Research Office, Faculty Operating Officer and Faculty Dean. If the issue(s) cannot be resolved, the matter will be referred to the Vice-Provost (Research and Enterprise) for a decision.
5) Are due diligence checks required if we have previously worked with a Research Third Party?
If the Research Office has previously reviewed the Third Party in relation to another project, some of the information may still be valid depending on when the last assessment was undertaken (e.g. Financial information and Ethical Policies (sections 2, 4)). In such cases, you may only need to complete the sections which are specific to the new project. If this applies to you, contact the Research Office at email@example.com for further guidance.
6) Should we review a third party organisation if there is no financial relationship?
If the relationship with a third party organisation does not involve any transfer of payments from an externally funded grant or contract, then there is no formal requirement to initiate a detailed relationship review through the research third parties due diligence process which is managed centrally by the Research Office.
Instead, as outlined in the College’s overarching Relationship Review Policy, PIs and departments are still expected to consider the potential risks to the College’s reputation and the research project of working with these collaborators, e.g. bribery, fraud, corruption, ethical concerns etc. General guidance can be found on the Managing Risk webpage.
7) What due diligence checks are required if Imperial is NOT leading the project?
The lead institution is responsible for undertaking the appropriate due diligence checks on third parties who undertake activities funded by a research grant or contract. If another institution is leading the project, it means that Imperial is a research partner and will not be responsible for undertaking checks on the third parties working on the project. However, if Imperial is planning to transfer funds to a Third Party using its own budget allocation, then a separate Research Third Parties: Relationship Review Questionnaire needs to be completed for each Third Party that is receiving funding from the project.
8) What due diligence checks are required when funding is not managed on a research account code (i.e. P code)?
The Research Third Parties Framework only applies to research projects set up on a P code. Departments are responsible for managing funds which are set up on other non-P codes. It is the responsibility of the department to undertake the necessary due diligence checks to satisfy themselves in line with the College’s Relationship Review Policy. Consider the potential risks to the College’s reputation of the proposed third party relationship, e.g. ethical concerns, bribery, fraud, corruption etc. General guidance can be found on the Managing Risk webpage.
9) What other partner checks are carried out, e.g. by the Finance department?
To reduce the risk of fraud, the College’s Accounts Payable (AP) team must independently verify the bank details provided by all new third parties (referred to as ‘suppliers’) before payments can be processed. Research subagreements must be put in place by the relevant Faculty Contracts team and a Bank and Contact Information Form must be completed by an appropriate finance representative from the third party organisation who will then be contacted directly by AP.
The Supplier Set-up and Payments process (including a downloadable Bank and Contact Information Form) is detailed on the Finance Knowledge Bank and will be followed once a grant is awarded. These financial checks will supplement the third party risk assessment undertaken by the Research Office.
10) What checks are required if we are receiving research funding from a new funder?
If the College has not received funding from an organisation before, Accounts Receivable (AR) will need to undertake a credit check before the new funder can be set up on the College’s finance system. An ethical review of the new funder is also required which is carried out by the relevant College office (e.g. Faculty Research Contracts, Enterprise, Advancement) who will notify the PI/Department if any potential issues are identified. Both of these checks must be satisfactory before an award can be formally accepted. Note that the due diligence checks conducted by the Research Office are only applicable to Research Third Parties we are transferring funds to.
11) What other guidance is available?
The following external indices and guides can help to highlight potential issues in the countries where you intend to work:
- UK Government Foreign Travel Advice
- UK Sanctions
- Corruption Perceptions Index collated by Transparency International
- OECD Country Risk Classification
- World Bank Governance Indicators
- Marsh Political Risk Map (Political Instability Index)
- Trusted Research
12) What are the due diligence responsibilities at post award, i.e. after the project has started?
a. Principal Investigator (PI) and academic department
Depending on the size and nature of the project, governance and management structures should be put in place at the outset to ensure overall project governance, oversee strategy and direction, and to monitor scientific deliverables and progress, e.g. Management Board, Steering Committee, Advisory Board etc. Membership should comprise representatives from each Third Party involved in undertaking the research and meetings should be held at agreed frequencies to discuss project progress (financial and scientific) and review and manage any identified risks.
The key responsibilities are:
- Establishing Third Party monitoring processes to oversee progress and agreed deliverables.
- Monitoring the timely receipt of scientific reports from the Third Party as required.
- Supporting Faculty Research Services with the financial management and monitoring of Third Party expenditure and facilitating the resolution of queries as necessary.
- Liaising with Faculty Contracts during the lifetime of the award where amendments to the subcontract agreement are required. This includes highlighting any serious breach that cannot be satisfactorily remedied.
b. Faculty Research Services/Joint Research Office
The terms and conditions of the main (primary) funder will flow-down to the Third Party via a separate subagreement. The Third Party will be required to retain adequate records of financial documentation, comply with the funder’s terms and conditions and ensure all contractual obligations are met.
The key responsibilities are:
- Supporting the PI and Department with the financial management of the project and providing guidance on the use of financial templates by the Third Party (if relevant) to support financial reporting and preparation of invoices submitted to the funder.
- Reviewing expenditure incurred by the College and any Third Party to ensure it is in line with the awarded budget and funder terms and conditions before submitting invoices and/or financial statements to the funder.
- Notifying the PI and academic department where Third Party expenditure is ineligible or exceeds the allocated budget, and liaising with the Third Party if further clarification and detailed justification is necessary.
- Engaging with the PI and academic department about the progress of the Third Party’s deliverables throughout the lifetime of the award.
c. Faculty Contracts
The award setup process requires a separate subagreement to be put in place with the Third Party which will flow-down the terms and conditions of the main (primary) funder. The subagreement must be signed by the Third Party before any funds are paid.
The key responsibilities are:
- Liaising with PI/Department and Faculty Research Services where amendments to the research subagreement are required.
d. Research Office
Once an independent assessment of the Third Party has been undertaken by the central Research Office, a summary of the risks identified and any recommended mitigating actions will be provided to the PI, Department, Faculty Research Services and Faculty Contracts.
The key responsibilities are:
- Working with the PI, academic department and Faculty Research Services to monitor and review the relationship with the Third Party during the lifetime of the award and conducting end of project Third Party relationship assessments as appropriate.
- Undertaking assurance reviews of the due diligence process and the implementation of recommended mitigating actions as appropriate.