Data protection processes
In response to covid-19 and new work-from-home norms, private equity firms are scaling their use of online collaboration tools. Many are pivoting daily operations to the Microsoft Office 365 suite and Microsoft Teams for conference calls, town halls and other needs. These applications have become the standard for managing and protecting sensitive data exchanged between parties.
Firms must adopt a virtual data room for their due diligence needs, one with strong security protocols in place. Some ‘straggler’ firms still use physical data rooms, which are harder to access, back up and update in real time. Firms should outsource this to a specialist who can act quickly to apply protections, including digital watermarking and access rights management.
Firms should also scrutinize portfolio companies’ data privacy and cybersecurity postures. A breach here can impact many stakeholder audiences, including potential consumers whose personal information is heavily regulated. Now is the time to move from passive assessment to more active management across these businesses. This may include contracting a third party to conduct annual risk assessments, test areas of vulnerability and scale these checks closer to the portfolio company’s sell off or initial public offering, to protect its valuation.
By Kirk Samuels, executive director of cybersecurity at Agio, a cybersecurity and managed IT organisation
During the global lockdown, e-signatures present a welcome solution to one of the challenges of homeworking. Many sectors which were historically skeptical have quickly become comfortable (eg, many UK banks are now accepting e-signatures on finance documents, particularly when they are able to rely on a law firm’s legal opinion). The key points to consider are:
Is e-signature suitable for your document? E-signatures are legally valid in most jurisdictions, but you should always check local law requirements. If the document needs to be filed with a registry, check they will accept it.
Will you use an e-signature platform? Under English law, simply typing a name or pasting a copy of a signature is sufficient. However, using an e-signature platform gives a greater level of security and in some jurisdictions it may be necessary in order for the signature to be recognized as legally valid.
How will you implement any necessary formalities? Some documents require a greater level of formality than a simple signature. Under English law, where a document needs to be witnessed, the witness must be physically present and not just view the events via video link. The witness must be over the age of 18 and not be a party to the document, or have a personal interest in its provision – so, during periods of self-isolation, although not best practice, it is acceptable for family members to act as a witness. In other jurisdictions, documents need to be notarized and some e-signature platforms are able to facilitate this.
By Madeleine Clark and Alistair Francis, partners at law firm Osborne Clarke
Robotic process automation
Digital transformation is a key part of the value creation plan for most businesses, and intelligent automation plays a crucial role in this journey. Before the crisis, a handful of private equity funds were using RPA within their internal functions to fully understand the nuances before using the technology in their portfolio businesses. Adoption has evolved rapidly since the pandemic started as it has had a negative impact on the front, middle and back-office functions of most businesses, including PE funds.
The response strategies of most businesses triggered significant breaches in operational integrity, especially where there was a dependence on human operations. In response to these new challenges, senior executives are looking at ways to leverage automation technology to minimize the human touch and improve business resilience.
We’re seeing PE funds adopting RPA in at least two ways. First, across functions in the PE fund itself (fundraising support, compliance reviews, portfolio performance review, financial accounting, etc). It’s not only enabling business resiliency but also enhancing the customer experience (investor relations) at a lower price point and in a secure manner (cybersecurity). Second, in their portfolio businesses, where the drive for cost reduction is now compounded by the need to remove exposure to human operations.
Above all, as we head into a recession, RPA is freeing up time for PE talent to focus on aspects that create value “within their business.”
By Amit Vij, managing director, private equity at ISG, a global technology research and advisory firm
Cloud services are transforming how businesses operate and covid-19 will drive more private equity firms to recognize the significant value delivered. As Eze Castle Integration helped clients move from office to remote work models, those operating on a cloud platform were able to smoothly transition their employees to a fully remote environment. Additionally, the flexibility of cloud services allowed firms to easily scale IT resources, ensuring users had access to data and applications without performance or availability concerns.
Beyond infrastructure, the cloud is powering increased collaboration, information sharing and virtual connections at private equity firms across the globe. During this period, more and more firms are embracing tools like Microsoft Teams, SharePoint and OneDrive to give employees the constant connectivity they require while also maintaining a strong security posture.
On the security front, firms must appreciate that the cloud is not secure by design. It is a powerful tool that must be designed, implemented and maintained with a security-first strategy. Looking ahead, we expect the multitude of cloud advantages – from flexibility and collaboration to security and cost optimization – to drive continued adoption.
By Mary Beth Hamilton, vice-president of marketing at Eze Castle Integration, a global managed service provider to the investment industry
This article first appeared in sister publication Private Equity International