The coronavirus pandemic has forced organisations to take shortcuts when it comes to managing risk, with less than half conducting third-party due diligence checks – a new risk management report has revealed.
Refinitiv, a financial markets data provider, has published the findings of its global risk management survey. It highlights how the Covid-19 pandemic substantially increased customer and third-party risks. While technology holds the potential to help organisations respond to the risk challenge.
Sixty-five per cent of organisations admit to taking shortcuts with know your customer (KYC) and due diligence checks. While 73 per cent of respondents were ‘under extreme pressure’ to boost revenue because of Covid-19.
As organisations rapidly forged new third-party relationships – only 40 per cent made screening a priority. Only 56 per cent of respondents admitted they did not fully manage risks related to sanctions screening.
At a glance key findings:
- 64 per cent focus more on being regulatory-compliant rather than proactively trying to prevent issues
- 71 per cent said that cybercrime became more difficult to contain due to Covid-19-related remote working practices
- 41 per cent have not fully managed KYC on the identity of clients
- 51 per cent have not fully run KYC verification of client data
Europe is one of the lowest-performing regions in terms of conducting due diligence checks (40 per cent), with the highest-scoring regions the Middle East (48 per cent) and Sub-Saharan Africa (56 per cent). The report suggests this may reflect recognition of heightened risks of doing business in these regions, making risk identification and prevention more essential.
Europe was also more concerned with the corruption of the business environment, crime leading to insufficient use of resources and crime encouraging more criminal activity (25 per cent).
Phil Cotter, global head, customer & third-party risk, Refinitiv said:“Covid-19 plunged many organisations that already had fragile third-party networks into an uncertain, turbulent and very competitive market and forced them to rapidly expand their vendor network as they struggled to protect critical supply chains from disruption.
“Looking back at the lessons learned over the past 16 months, it is clear that businesses must close the compliance gap and focus on building a resilient supply chain with due diligence and financial crime prevention at its core.
“As organisations slowly recover from the Covid-19 impact, we expect an increase in technology investment as they seek new way to address customer and third-party risk challenges.”
The report highlights the power of technology innovation. Eighty-six per cent of respondents agreed that innovative digital technologies have helped identify financial crime. Meanwhile, 91 per cent of those who use technology in KYC/compliance are looking to improve financial crime detection and mitigation over the next 12 months.
- 60 per cent of those who regularly use technology to prevent risks associated with financial crime are far more likely to have better collaboration with law enforcement agencies than those who don’t
- 45 per cent believe that application programming interface (API) technology can significantly help reduce risk of crime
The survey also found that the pandemic has prompted greater collaboration across industries. It links this trend to the use of technology. Organisations already utilising the power of technology to address financial crime are 60 per cent more likely to collaborate with law enforcement than those not using technology.
The Global Risk Management Report 2021 surveyed almost 3000 managers in large organisations across 30 countries.