Organizations Have Deprioritized Risk Management Due to Pandemic Pressures, Refinitiv Finds

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Pandemic pressures — keeping operations running, rebuilding fractured supply chains, increasing revenues and profits — have caused organizations to deprioritize risk management, according to an annual survey from financial technology company Refinitiv. The survey shows that two thirds of respondents agree that “the pandemic has forced us to take shortcuts with know-your-client/due diligence checks.”

Refinitiv conducts an annual survey on a subject related to risk management. Past examples include financial crime (2018), data and technology innovation (2019), and third-party relationships (2020). This year, it looked at the impact of the coronavirus pandemic, surveying 2,920 managers of large organizations in 30 countries.

This trend of deprioritizing risk management appears to have been at least partially enabled by a relaxing of external pressures. Compared to 2019, respondents reported feeling:

• 13% less pressure from governments.
• 14% less pressure from regulators.
• 8% less pressure from law enforcement agencies.
• 10% less pressure from suppliers, industry bodies, NGOs, and media/journalists.

This sentiment is reflected in the Foreign Corrupt Practices Act’s drop in enforcement actions, which were at their lowest level in ten years.

Overall, 44% of respondents reported conducting initial formal customer or third-party due diligence checks — five percentage points lower than in 2019. One reason for the decline may be the greater difficulty of obtaining data for third-party checks experienced during the pandemic. Respondents reported that they were only able to obtain 46% of the required information, as opposed to 51% in 2019.

Refinitiv, which offers risk intelligence data, due diligence reports, risk screening, and digital identity verification services, noted that technology is the most effective tool to close compliance gaps and manage risk. 86% of respondents agreed that “innovative digital technologies have helped identify more possible financial crime issues.” On the contray, those who forego risk management technology are likely overlooking financial crimes that impact them. Refinitiv writes,

“Nearly half (45%) of those who don’t use technology to fight financial crime said they saw no instances of it over the last 12 months, but the figure falls to 21% for those using tech. In other words, what you don’t use tech to look for, you may not see.”

In increasing rates of adoption of new risk management technologies, appeals to efficiency and cost savings were found to be more effective than appeals to preventing financial crime.

Refinitiv stated that the other major risk management tool is collaboration, which is facilitated by the adoption of new technologies:

“Those who regularly use technology to prevent risks associated with financial crime are far more likely (58% said they do) to have better collaboration with law enforcement agencies than those who don’t (36%).”

On the environmental front, respondents reported greater concern as a result of the pandemic. 43% ranked “green crime” a greater priority following the pandemic and two-thirds said that the pandemic increased the importance of environment, social, and governance principles.