For all financial institutions, risk is an important issue. An organisation’s attitude toward risk, as well as its appetite for it, plays a significant role in helping to define that organisation’s place in the business world.

Since the dust began to settle on the financial crisis, the question of risk has been brought into even sharper focus, with many companies facing up to the fact that their approach to risk pre-crisis was inadequate. Indeed, systemic risk was a key contributing factor to crisis itself. Out of the ashes of the crisis, a number of regulatory and legislative developments have emerged, which have helped to set the agenda for a new global perception of risk. Though recent political developments in the US have threatened to undo some of the strong regulatory work done over the last decade, many organisations are committed to shifting their focus to risk management.

One of the most important developments has been the emergence of de-risking. De-risking – the process by which financial institutions exit their relationship with certain clients, products, markets or jurisdictions that are perceived to be risky – has become increasingly popular in light of more stringent regulatory scrutiny. De-risking can help companies drastically reduce the likelihood and impact of regulatory actions being taken against them by restricting or terminating correspondent banking relationships with clients, or categories of clients, which could pose a money laundering threat or have links to terrorist financing.

This de-risking process has become prevalent as regulatory and criminal enforcement around anti-money laundering (AML) violations have risen to the fore. Financial institutions are being forced to take action.

Apr-Jun 2017 Issue

Richard Summerfield