Korean firms urged to enhance risk management abroad

Refinitiv Korea Representative Director Kim Suk-joon / Courtesy of Refinitiv Korea

Refinitiv's Korea chief warns of risks associated with overseas biz partners

By Kim Bo-eun

For financial companies in Korea, global expansion has become a crucial task amid the country's slowing growth and low interest rates. Firms including banks and brokerages are increasingly scaling up their presence overseas, especially in the fast-growing Southeast Asian region.

Financial data and risk solution provider Refinitiv says it can play a role in these efforts. The company is the former financial and risk unit of Thomson Reuters, taken over by private equity firm Blackstone Group in 2018. It is set to be acquired by the London Stock Exchange this year.

"If global expansion is the way Korean financial firms should go, how to prepare for associated risks would be one of the factors that should be seriously considered. We can provide help to this end,” Refinitiv Korea's Representative Director Kim Suk-joon said in an interview held at the company's office in central Seoul, Thursday.

Refinitiv confidently states that a former part of Reuters it holds an advantage in the scale of data it can provide. Reuters has dealt with financial market data since it was founded in 1851.

"We have provided financial services for 170 years. We believe we do not have competitors when it comes to the amount and quality of data we can provide," Kim said.

"Refinitiv also has operations around the world in 160 countries serving over 40,000 clients," he added.

Refinitiv

Refinitiv's business is composed of two main parts _ financial data and risk management through offering data about business partners.

"In the past when it came to finance, it was all about how much profit you could make from investments. In recent years, especially in regions such as the U.S. and Europe, we see an emphasis on how much entities know about their business partners and trust them," Kim said.

"This is because transactions have become much more complicated than before. A terrorist organization can make transactions through a third party and there can be various routes for money laundering."

He explained this can get a business into trouble beyond harm exerted by a risky partner.

"In the past, risk management was done to protect one's business, but now it's about adhering to regulations, since authorities such as those in the U.S. can apply sanctions for failing to do so.”

“U.S. regulations are not irrelevant to Korea. A Korean business can get into trouble for trading with an entity that is on a list of terrorists drawn up by the U.S.,” he said.

In December 2017, the New York Department of Financial Services stated it would impose an $11 million fine on NongHyup Bank, for failing to maintain an anti-money laundering program at its New York office.

The number of sanctioned cases have increased in the past decade.

Risk management

The risk management is done in a two-stage process.

First, an entity can check up on a potential business partner with the data Refinitive provides. If suspicious information is found, the entity can choose not to deal with the partner or do a second checkup.

In the second stage, the entity can get a report containing a greater amount of information about the partner.

Refinitiv has not launched the second stage of the process in Korea.

This is mainly because authorities and businesses have not felt the necessity.

"But all financial transactions are going toward this direction of enhanced due diligence based on global regulations, and Korea will need to do so as well,” Kim said.

“This is why we are trying to raise awareness of the issue, joining hands with law firms who can advise businesses.”

He said this could be done through seminars introducing overseas cases and how major financial institutions have systemized the risk management process.

Kim noted that other developed economies in Asia such as Singapore, Japan, Hong Kong and Taiwan are putting in much greater efforts towards this end.

Refinitiv Korea currently has about 500 clients, which include government entities, businesses in finance and IT.