There is increasing pressure on oil and gas companies in Aberdeen to address the risks associated with counterparties, be it suppliers, agents, vendors, contractors or joint venture partners – the list goes on.
The cost of getting this wrong is high including reputational damage, government investigations, financial penalties and even potential criminal liability.
Year on year oil and gas companies are becoming more complex and are relying more heavily on third parties. Many of these third parties operate in higher risk territories and at the same time, due to cost pressures, companies need to manage these risks with less head count. There are often fewer options in certain jurisdictions for particular services or products, which makes it even more difficult to get it right when assessing who to deal with, especially where norms within that territory are non-compliant with good practice.
As people have less time and are under increasing pressure to deliver results much quicker and more accurately, there is a move towards using advanced technology to save time, money and reduce risk. Technology allows thousands of sources across multiple languages to be searched in minutes. Artificial intelligence and Natural Language Processing can also distinguish between words having different meanings, such as ‘it’s a “fine” day’ and ‘they were subject to a “fine”’ to maximise the relevance of the search results.
However, reliance on performing searches using search engines such as Google is flawed, particularly with the enforcement of European Privacy laws which permit individuals “the right to be forgotten”. People can now request the removal of links relating to old criminal convictions from search engines and this is not widely known.
Advanced technology can, in many circumstances, automate the process of gathering relevant information on prospective counterparties and distil it down in a way that a reasonable person can make the right call on whether to work with a counterparty or not. However, having a more sophisticated tool that can assess multiple platforms and process a wide range of sources and information will help to assess risk with greater accuracy, as well as deliver results more cost effectively and in a shorter time-frame.
KPMG’s technology tool, 3PID (3rd Party Intelligent Diligence), is helping a number of companies address their third party risk using a cognitive computing platform that accesses thousands of sources including the open web, corporate registration records and data aggregators to automatically and comprehensively assess risk. It performs everything from simplified to enhanced due diligence on individuals and legal entities in a matter of minutes and auto translates results from over 60 languages into English. Its use of artificial intelligence and natural language processing to read, understand and piece together text can result in removal of 95% of false positive results.
With the risk and cost of getting it wrong increasing, we are seeing more and more companies using automated tools such as the 3PID tool to mitigate their third party risks. This move towards technologically advanced risk assessment tools is most likely to continue, especially with increased reliance on third parties within the UK oil and gas sector, both locally and internationally.