Phil Cotter, Managing Director of the Refinitiv Risk business, takes a look ahead in 2021, also reviewing of some of 2020’s key themes and trends in the risk and compliance space.
- 2020 saw the COVID-19 pandemic redefine the risk landscape. Risk levels rose against a backdrop of insufficient due diligence, which was highlighted in our 2020 report The Real Risks: Hidden threats within third-party relationships.
- 2021 will see ongoing digital transformation, a growing need for trusted data, and a strong focus on sustainability.
- Refinitiv will continue to support and enable firms in their risk and compliance functions by delivering the data, leading-edge technology, and human intelligence they need to manage third-party risk and fight financial crime, including green crime.
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The COVID-19 pandemic undeniably redefined what business as usual has meant to innumerable organizations across the globe.
In the risk space, a sudden and dramatic increase in online activity was almost immediately matched by steep rises in cybercrime, fraud and a plethora of other online crimes as financial criminals wasted no time in exploiting new opportunities.
Alongside this, global supply chains experienced equally sudden and often severe disruptions, and many firms were left scrambling to onboard new suppliers at short notice and against a backdrop of rising third-party risk.
This altered risk landscape came in the wake of the 2020 Refinitiv report, of nearly 1,800 global third-party relationship, risk management and compliance professionals — a survey that revealed respondents deal with an average of nearly 10,000 third-party relationships, and further, that many are not conducting complete third-party due diligence, either when onboarding new third-parties, or in terms of ongoing monitoring.
Our survey revealed that 43 percent of third-parties are not subject to due diligence checks. This statistic was up six percentage points from our 2016 survey, and moreover, 60 percent of respondents are not fully monitoring third-parties for ongoing risk.
Our survey also shone a spotlight on the rising threat of green crime, highlighting an urgent need for organizations to take more decisive action against this type of crime. Worryingly, 84 percent of institutional investors believe that ‘greenwashing’ (a popular term for providing misleading environmental credentials) is becoming increasingly common.
2021: the year ahead in risk and compliance
As 2021 unfolds, some key themes to watch will include:
Digital transformation will continue apace, driven by a host of interconnected factors, including ever-accelerating fintech innovation and the ongoing impact of COVID-19, which is forcing firms to re-consider their digital offerings to clients.
A growing need for trusted data
Our survey found that a significant 37 percent of respondents consider a lack of data to be their biggest hurdle when identifying supply chain risk. The need for accurate, trusted data as the foundation of successful compliance and risk mitigation continues to grow and must be addressed if firms are to turn the tide on pervasive financial crime.
Sustainability as a key focus area
The United Nations’ (UN’s) Sustainable Development Agenda came into effect in January 2016. Based on 17 Sustainable Development Goals (SDGs), the agenda aims to promote a sustainable future, which in turn must be supported by sustainable decisions.
Again, a solid foundation of reliable data — specifically as it relates to environmental, social and governance (ESG) matters — is needed to enable better decision making, and there is a growing appreciation of the need for such data to be incorporated into any effective sustainable investment and supplier risk management decisions.
Watch: Refinitiv Perspectives LIVE — Third-party risk and environmental crime
Increase in sanctions
Increasing geo-political tensions, particularly between the USA and China has seen an increase in sanctions being issued by both countries. Meanwhile the UK, in preparation for Brexit, announced a number of sanctions in 2020 and is likely to continue to develop its sanction program in 2021.
Companies will need to ensure that their sanction programs are able to adapt to this volatile geo-political environment to protect their companies from sanction-related breaches and possible regulatory enforcement.
Adopting a holistic approach to risk
Refinitiv will continue to support firms by delivering the data, technology and human expertise they need to navigate the risk and compliance landscape in 2021 and beyond.
Our World-Check risk intelligence database, which reached a milestone 20-year anniversary in 2020, remains a critical tool that delivers accurate, trusted data, and which empowers organizations to make better risk-related decisions and fight back against sophisticated financial criminals.
2020 saw Refinitiv acquire Giact Systems LLC, a specialist in digital identity, payments verification, and fraud prevention. The Giact platform will operate together with World-Check to offer clients an optimized and holistic solution aimed at mitigating money-laundering risk and preventing financial crime
We also acquired The Red Flag Group in 2020 to expand our due diligence offering.
Watch: COVID-19 fuels poaching pandemic — #FightGreenCrime: A Refinitiv Data Moment
Turning to the critical and complex area of ultimate beneficial ownership (UBO), Refinitiv’s innovative UBO Check, powered by Dun & Bradstreet, delivers data that breaks down ownership hierarchies across more than 200 countries and reveals 100 million plus connections.
This enables compliance professionals to uncover the identities of beneficial owners, so that they can be screened for potential risk.
Global anti-money laundering (AML) and anti-bribery and corruption (ABC) regulations place stringent UBO compliance obligations on organizations, but compliance teams often struggle to identify the UBOs of all the entities with which they transact.
Enhanced due diligence reports
Where risk is suspected or detected, we offer more detailed investigation in the form of our due diligence reports that deliver detailed background information on customers, third parties (such as suppliers and distributors), or investment opportunities.
Moreover, we are working hard to support organizations’ sustainability initiatives, and provide ESG data through our partnership with Sigwatch, a leading provider of NGO issues analysis. This data can be used by organizations to monitor third-party environmental performance and make better, more sustainable decisions in line with the UN’s SDGs.
Refinitiv remains committed to helping firms adopt a strategic and holistic approach to managing and mitigating risk, and as a new year unfolds, we will continue to deliver leading-edge data and tools that promote accuracy, efficiency and support sustainable decision-making.