Responding to Counterparty Risk
Whether through corruption, fraud, or counterparty risk, bad actors present a significant challenge for both the public and private sector. Organisations have a responsibility to understand how various entities within their counterparty network are connected.
In this blog post, we’ll explore counterparty risk, the challenges associated with effectively identifying risk and showcase how our MINERVA platform can help organisations to respond to these challenges.
What is Counterparty Risk?
Historically, counterparty risk has related to the financial relationship between two organisations. In recent years, however, the term has grown to include the associated reputational and regulatory risks of doing business with a given organisation.
In a 2019 report titled “Counterparty Due Diligence”, Deloitte stated that “Given the present day competitive scenario, companies have increased their reliance on third parties… However, this also exposes them to various reputational and regulatory risks making it imperative to select business partners after careful considerations.”
- Liabilities relating to unfulfilled contracts/commitments.
- Full or partial write-off of amounts invested.
- Loss on account of the defaulting third party.
- Cost incurred to conduct a ‘post-incident investigation.
- Cost incurred to hire legal counsel.
- Cost incurred to minimise effects of negative publicity and damage to reputation.
- Potential investigation by regulatory authorities.
- Penalties/financial implications for companies as well as the management.
- Civil/criminal charges and proceedings.
- Negative publicity and reputational damage
Addressing counterparty risk is oftentimes a retrospective process, occurring from a point of damage control, rather than proactive prevention. In their “Stay Ahead of Third-Party Risk” report, Gartner found that 83% of legal and compliance leaders identified third party risk after the due diligence period and before recertification.
Disconnected datasets often mean that organisations fail to create a complete picture of the risks with a potential customer or partner. The Sixth Annual Gartner Chief Data Officer Survey found that respondents who successfully increased data sharing were 1.7 times more effective at showing demonstrable, verifiable value to stakeholders.
A Complete Picture
MINERVA is an Intelligent Search & Discovery platform that’s designed to show users how various entities within siloed datasets are connected. A unique feature of the MINERVA platform is its ability to search for patterns and behaviours as well as specific entities. This enables users to proactively identify and extract the critical business insights that matter most to them.
In the following demo, we demonstrate how users can quickly and easily ingest their own data into the platform. From there, we show how MINERVA can enable users to perform comprehensive due diligence checks based on the relationship between siloed datasets.
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