It is becomingly increasingly important that companies screen their third parties and associates against negative news sources from around the world. This can help them to identify reputational risks, as well as commercial and investment opportunities. In this blog, which is part of our series on adverse media screening, we explore what adverse media screening involves, how it can help your company, and how data and technology can support this process.
There is no doubt that reputation risk management is a key task for companies in 2024. Adverse media screening is critical because it is one of the clearest indicators of the reputation of a given company or individual. Simply put, adverse media screening (also known as negative news screening) means searching for bad news about a company or individual.
Why has adverse media screening becoming so important to companies? A key reason is that checking for any negative media articles is a vital step in a company’s risk-based due diligence process, which is necessary to comply with global regulations. Negative news mentions surface risks which can then be weighed against findings from other data sources, such as legal, company and sanctions data. If the risks are deemed sufficiently serious, Enhanced Due Diligence should then be applied.
But the benefits of negative news screening are broader than risk management alone. The practice supports companies with critical activities such as:
- Verifying claims around Environmental, Social and Governance (ESG) performance
- Meeting customer and investor expectations of a positive ESG impact and ethical behaviour
- Providing an early-warning signal for emerging and future risks and opportunities
- Giving an unvarnished and global view of an entity’s reputation
- Guiding investment decisions and strategies
- Reviewing prospective M&A targets
- Assessing potential markets and segments for new products and technologies
The reputation economy: why companies who fail to screen for adverse media could be left behind
In the modern world of business, reputation is everything. A survey of executives across 22 countries by Weber Shandwick revealed that, on average, 63% of a firm’s market value is attributed to their reputation. What’s more, the interviewees who most closely associated reputation with their company’s financial performance were most likely to be those who measured their reputation.
Several recent and emerging trends explain why it’s more important than ever for a company to understand their reputation and that of their third parties through activities like adverse media screening. These include:
- Growing ESG expectations: Surveys show that younger consumers, investors and employees are more likely to buy from, invest in and work for companies that can demonstrate a positive commitment to ESG. Assessing a firm’s ESG contribution is notoriously difficult, and many companies have faced accusations of ‘greenwashing’. Adverse media is among the best sources to truly determine a third party’s ESG credentials because it surfaces allegations of ESG violations which can then be investigated further.
- Digital proliferation of news: The consumption of print media and TV news is falling year-on-year in most countries, according to Oxford University’s Digital News Report. Instead, most people now consume media online, which means a negative news article in one country can rapidly spread to a truly global audience and damage a company’s reputation.
- New regulatory requirements: The Financial Action Task Force’s standards on anti-bribery and corruption recommend that companies carry out “verifiable adverse media searches” of risks posed by customers, and the Wolfsberg Group advises negative news screening in its principles for global banking regulations. As new regulations continue to be brought in, we expect more to introduce similar expectations of companies.
Data and technology: the key to effective adverse media screening
Adverse media screening has become a powerful tool for companies seeking to protect and enhance their reputation. But, when companies come to implement negative news screening, they face numerous challenges. A major challenge is that so much online media data appears to be inaccurate or unprovenanced. 56% of people surveyed by Oxford University’s news report last year said they struggle to distinguish between accurate news and misinformation in online media. Companies could face significant problems if they make decisions based on inaccurate or uncertain information in news articles.
In order to overcome this challenge, companies should use trustworthy, authoritative and accurate data sources in their adverse media screening. They should also ensure their data covers multiple countries and languages, as well as coverage in previous years and decades. A technology partner such as LexisNexis can bring together all the relevant data sources for you in one platform.
A second challenge facing companies is the enormous volume of online media data that exists. The high volumes of news coverage happening every day would make it extremely labour-intensive for compliance officers to browse every article for mentions of their target entities. Instead, technological solutions can streamline the process by automatically screening third parties against all relevant media sources, as well as picking out keywords and topics with accurate identification of negative sentiment. This gives your compliance officers fewer, and more relevant, negative media mentions to investigate.
LexisNexis helps companies to overcome these twin challenges and supports organizations looking to implement best-practice adverse media screening processes. LexisNexis brings together more than 20,000 premium, regional and local news sources from all over the world, which capture over 100 languages and span more than 40 years, to help contribute to a comprehensive adverse media screening process. Powerful technology combined with robust content can allow for faster, more comprehensive
screening to help contribute to greater levels of protection.
Looking for more tips on how to implement adverse media screening as part of an effective due diligence process? Our E-Book, ‘The Age of the Reputation Economy’, explains why adverse media screening has become essential for companies seeking to manage risks and exploit opportunities. Download it for free today: https://lexisnexis.widen.net/s/jcwkqkdfs6/seg-gns-ebook-adverse-media-reputation-economy
Disclaimer: The data, information and analytics LexisNexis® provides is for information purposes only and does not constitute advice or recommendation. Users are responsible for interpreting the data, information and analytics, and for the decisions and actions that they may take thereafter.