Adverse Media Monitoring in Reputational Risk

Any organization is only as successful as its reputation. Whether with consumers below or regulators above, if a company suffers significant reputational damage then the impact on revenues, profits, or share price can be catastrophic.

Examples of this effect are legion. To give just one example, the Facebook privacy scandal of 2018 led directly to a fall of $120bn in the company’s value. That was the largest such drop in history, underlining just how much can be at stake if organizations are not proactive in both identifying emerging reputational risk events, and responding appropriately to them.

It is no wonder, then, that 87% of executives rated reputational risk as more important than any other strategic risks when surveyed by Deloitte. The question for these executives and others, is how to make early detection and rapid response possible.

Let’s find out.

Protecting reputation across industries and use cases

It’s important to start by understanding precisely what we are looking to manage. There is any number of possible reasons for a company to suffer reputational damage: think of disastrous product launches, data breaches, or misguided public statements from senior executives. The list is endless, and some of these things are within our operational control, whilst others are not.

Furthermore, the rise of social media has ensured that bad news travels faster than ever before, and is amplified in a way previously impossible. Reputations can be made and destroyed within hours, and the potential negative consequences are magnified accordingly. 

That fact reminds us that in reputation management speed is of the essence. When things go wrong, we need to respond appropriately, but we need to do so in a way that does not make things worse. That’s why it is vitally important to be aware of any threats to an organization’s reputation, from whatever source, as soon as is possible. Sometimes it is literally the case that hours can make the difference, and provide the time needed to respond in a way that minimizes the damage - or even turns it into an opportunity.

I’ll talk about how to ensure you have those hours in hand below, but first let’s talk about the threat that third parties - such as our own customers - can pose to our reputations.

The unique challenge in financial services

It’s not always just our own reputation we have to be concerned about. In financial services in particular, “adverse media” relates specifically to negative coverage of a client of the business - either an individual or organization. And in most jurisdictions, there is a legal requirement to screen for this type of adverse media on an ongoing basis. So some way to identify adverse events quickly and accurately isn’t just a nice-to-have - it’s a must-have.

It’s important to understand the why behind these policies. In brief, in order to combat a variety of criminal activities, ranging from money laundering to financing terrorism with a lot of stops in-between, it is important to have clear, current knowledge of who the customer is, and, where necessary, where their money is coming from.

With apologies for the incoming three-letter acronyms, financial institutions (and many others) are expected to follow Know Your Customer (KYC) guidelines, which in turn require Customer Due Diligence (CDD) to verify identity, and Anti-Money Laundering (AML) policies to ensure that funds can be traced to legitimate sources.

All this is to ensure that financial institutions are not supporting and legitimizing criminal activity. Most of us as consumers are familiar with some of the standard checks that any bank would go through in order to ensure that we are who we say we are and that our money comes from legitimate sources. But in certain circumstances, more is required.

Specifically, when a client is deemed ‘high risk’, CDD typically requires ongoing media monitoring for any new information - or ‘adverse media’ - relating to that person or company. As above, this could be related to criminal activity, money laundering, financing terrorism - the list goes on. 

It is important to understand that in most cases, under most regulatory regimes, this is not an option - it is a requirement, and if an organization fails to note and act on new information in a timely manner, they risk both reputational damage and fines - that can run into millions of dollars.

So for these organizations - whether managing reputational risks emerging from their own business or their clients, it is vital to use active, ongoing monitoring to spot threats and this enables them to be actively managed.

Proactive monitoring for adverse media

For financial institutions, big corporates, and brands in general, actively monitoring for adverse media is a non-trivial task. To put things very simply, there are some core reasons for this:

• There are many types of risk events that can impact a companies reputation
• It’s necessary to monitor potential risks stemming from customers, employees, and even competitors, and
• There are a lot of news sources out there

Without any further detail, I suspect any reader at this point will readily agree that attempting to manage this process manually is a non-runner. It would simply require huge resources, and even then the procedure would be both too slow and too prone to error to satisfy regulatory requirements.

Given that this is the case, some form of automation is clearly needed. But what form should it take? The challenge, in essence, is as follows:

• Find relevant news relating to parties and topics of interest
• As quickly as possible
• Whilst ensuring it is accurate

Let’s take these in turn and examine what the detail looks like for each.

Finding relevant news might sound relatively straightforward. It isn’t. For adverse media monitoring purposes, it certainly won’t be good enough to type the name of an individual or company into Google Alerts and hope for the best. Nor will building a simple solution around a raw feed from a news aggregator. 

Consider just these two issues:

• Adverse media scanning requires an understanding of what is happening everywhere in the world. To take the financial services example, the very nature of the events we are looking for (sanction breaking, financing terrorism, cyber breaches, etc) means that a clear eye into events across the globe is required. Major English-language sources are not enough - a solution will have to scan sources from every country, in multiple languages.
• Constructing searches using conventional ‘keyword + Boolean’ approaches will deliver a significant amount of noise along with signal, to the extent that processing news from around the world requires a good deal of manual input and reintroduces the time/accuracy issues mentioned above.

In other words, a compliant monitoring solution needs to be truly comprehensive around sources, and an efficient one should allow for meaningful entity searching - returning only those events that actually relate to the individual or organization we are interested in. 

It is for this reason that AYLIEN News API uses natural language processing (NLP) and machine learning to accurately determine the true subject matter (or entity) each news item relates to, and in turn enrich each item with that data (and 25 other attributes). 

As quickly as possible

As mentioned above, in adverse media scanning, time is of the essence. Organizations are expected to respond rapidly to relevant news, not wait until it is common knowledge.

Unfortunately, many simpler scanning approaches will do precisely that: alert the organization when stories appear in mainstream, western publications. But as mentioned above, local sources often get the story first and should be included in your search. They must be included - but also automatically translated so as not to introduce a manual (and often time-consuming) step into the process.

By the same token, it is essential to be ‘always on’, and automate the process from publication to alert to the greatest extent possible. Every time manual intervention is required - whether to establish the relevance of a story, to ensure it is true, to establish importance - is one more opportunity for time to be lost. 

A fit-for-purpose adverse media solution scans continuously and gets relevant information in front of the right people in minutes.

Whilst ensuring it is accurate

In today’s era of fake news, determining whether or not a specific news item is true has become a key step in any adverse media process. And that challenge is exacerbated by the understandable desire to include a wide variety of international sources, including smaller publications and blogs, in our activity.

Or to summarise - we can’t just take the news at face value anymore, and this is particularly true when it comes to making judgments about the individuals and organizations we do business with. 

To determine accuracy, we could wait for consensus, or check manually, but both these approaches risk being too slow for our purposes - and checking manually, in particular, may be impossible.

Fortunately, there are other ways to ensure accuracy, most importantly:

• Constantly evaluating the sources we use for trustworthiness and accuracy. AYLIEN News API aggregates 80,000 sources from around the globe, and every one is continuously evaluated to ensure only our clients only see media they can trust.
• Clustering of stories (which is made possible after accurate data enrichment, and is also supported in AYLIEN News API), which shows the volume of stories around a particular event, and thus implies some level of consensus that ‘this actually happened.

Together, these approaches will mean that when something appears on our adverse media radar, we can be reasonably certain that it is true - and we can act on that information in confidence.

As you can probably tell from the content above, AYLIEN News API was built to meet precisely this kind of challenge. We enable our clients to find, verify and distribute news relevant to whichever organizations or individuals the business works with. In turn, that allows them to meet regulatory requirements and protect their business at the same time.

If you would like to join them, get in touch.