PROVIDENCE – More than two-thirds of executives would find ratings on financial crime and integrity more valuable than information from audit reports, credit ratings, self-reported data and other conventional assessments when making investment decisions on firms operating in “emerging and frontier” markets, a new survey found.
The survey was conducted online last fall by Gerson Lehrman Group for Sigma Ratings, which rates companies on corporate governance and financial-crime risk.
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The survey included interviews with financial institutions and asset managers in North America and Europe who routinely invest in emerging and frontier markets. Surveyed executives were asked how they currently make decisions on noncredit risk, as well as what specific risks they feel are most important to understand.
They noted that financial-crime compliance and the risks associated with illicit finance outweigh more-traditional concerns such as credit and cyber risk factors, Sigma said.
The survey found that 85% of investors and global banks would find independent ratings for financial crimes and governance “very or extremely” valuable. In addition, 85% said alternative ratings that look at finance crime and governance would “considerably or moderately” improve credit-risk decisions.
It also found that 97% of investors consider a firm’s reputation as a critical factor in a decision to do business. Overall, respondents ranked financial-crime risk of higher importance than other factors, including corruption, credit and geopolitical climate.
“There is a growing crisis of trust in the financial industry,” Sigma CEO Stuart Jones Jr. said in a statement. “Investors around the world are searching for a better way to measure and manage financial-crime risk exposure.”
Scott Blake is a PBN staff writer. Email him at Blake@PBN.com.
