Risk assessment

A risk assessment is an objective evaluation of a potential risk, be it a subject, a customer or something else entirely.

The risk's objective assessment should take into account all the circumstances surrounding a customer or other subject.

We often talk about risk assessments of customers - and thus what risks they may entail by being a customer of the company. But basically, you can do risk assessments of many things - but the essence is the same; an assessment of an issue and the risk associated with it.

Once the risk assessment has been completed, the business needs to make a decision on whether or not there is an increased risk in the customer relationship. If there is an increased risk, additional actions may need to be taken or an impact assessment conducted.

While low or no risk will not lead to further action.

Customer risk assessment can be done once, often at the beginning of the customer relationship, or continuously.

Risk assessment of customers

Few companies will say that they carry out a risk assessment of a customer - unless they are required to do so by law.

But in fact, this is often what happens anyway when companies perform a credit assessment of a customer.

A credit rating of a customer is a type of risk assessment. A credit rating provides a picture of a customer's financial situation - and thus gives the company an opportunity to adjust its credit and credit terms accordingly.

Statutory risk assessment of customers

If your company processes, moves, administers or otherwise handles customers' cash, payments or similar - then your company is probably covered by the Money Laundering Act.

Companies covered by the Money Laundering Act include banks, accountants, lawyers, real estate agents and a wide range of other types of companies (section 1 of the Money Laundering Act). According to chapter 2, section 7 of the Money Laundering Act, these companies must "identify and assess the risk that the company or person may be misused for money laundering or terrorist financing".

This makes it mandatory for companies covered by the Money Laundering Act to conduct risk assessments of their customers.

Typically, the company has a number of internal questions, forms and frameworks - which the individual employee completes. For example, how many transactions a customer expects to have, whether the person is a politically exposed person - PEP, etc.