Velocity Country Risk Score is a composite measure of uncertainties of doing business in a particular country. Arising out of various global and systemic factors related to geopolitical, macro-economic, social, and legal environments of a country, these uncertainties capture broader regulatory risks germane to the jurisdiction in reference that includes money laundering and terrorist financing risks. Thus, Velocity Country Risk captures the comprehensive uncertainties from a multitude of risk dimensions in assessing uncertainty in money laundering and terrorist financing risk for a country. Besides incorporating the guidelines of Wolfsberg Principles, 1 Velocity’s ML-TF Country Risk Score (CRS) version 3.0 captures a multitude of risk dimensions as 6 distinct risk indices: Global regulatory risk index, Narco-terror risk index, Structural terror risk index, Systemic corruption risk index, Systemic regulatory risk index Systemic legal risk index.
STEPS INVOLVED IN RISK COMPONENT CREATION
Identify sources of risk component.
Evaluate and incorporate the risk component with the associated weight factor.
Examine sources relevant to the risk component.
Test applicable components via quantitative methods.
Interpretation and reporting of the risk assessment results to aid risk mitigation and key decision-making
COUNTRY RISK SCORE ADVANTAGE
- Scaled, calibrated, and weighted based on robust statistical methodologies.
- A nuanced composite risk metric is created for all risk components.
- The composite can be adjusted and updated with time sensitive benchmarks, statistics, and events.
- Each risk index goes through detailed evaluation, comparison, and is normalized for consistency with anecdotal evidence.
- The risk indices are calibrated to reduce statistical uncertainty while increasing their confidence levels.
- All risk indices are standardized for homogeneity and internal consistency.
COUNTRY RISK DATA MANAGEMENT PROCESS
Gather Sources/ Lists
List Rate Risk Data
Aggregate and Scale
Composite Risk Rating
Global Regulatory Risk Index
Global regulatory risk index for a country represents the measure of uncertainty arising out of a comprehensive set of international regulatory regimes, for which the composite quantitative measure is generated from 10 different risk components, which are - International Narcotics Control Strategy Report (INCSR) I Score, INCSR II Score, Financial Secrecy Index (FSI) Score, OECD Score, FATF Score, BASEL III Score, OFAC Score, UN Sanction Score, EU Sanction Score, US Sanction Score.
Narco-Terror Risk Index
Narco-terror risk index for a country is a measure of uncertainty arising out of perceptions from investors, travelers, commercial entities, and international entities, for which the composite quantitative measure is generated from publicly available data, surveys, and continuing events related to narcotics and terror-related activities and sanctions that impact the country and jurisdiction in question.
Structural Terror Risk Index
The structural terror risk index is created to capture systemic, structural, and inherent uncertainties in the country arising out of actual on the ground issues, events, and scenarios of terrorism-related activities, which are not captured from formal sanctions lists, surveys, opinions, and indices published globally, yet can significantly impact global anti-money laundering and terrorism combating efforts.
Systemic Corruption Risk Index
The systemic corruption risk index is created to capture the systemic and structural uncertainties in the country arising out of both perceptions and actual instances of corruption. The composite quantitative measure of systemic corruption in the country is generated from sanctions lists, surveys, and opinions.
Systemic Regulatory Risk Index
The systemic regulatory risk index is created to capture the systemic and structural uncertainties in the country arising out of ineffectiveness in regulatory frameworks, for which the composite quantitative measure is generated from an understanding of risks in the country from a lack of regulatory awareness, an absence of regulatory awareness among government officials, a lack of regulatory infrastructure so that such an environment can directly impact the return on business investment and international exchanges in cultural, economic, and academic pursuits.
Systemic Legal Risk Index
Systemic legal risk is created to capture the systemic and structural uncertainties in the country arising out of ineffectiveness in its legal frameworks, for which the composite quantitative measure is generated from legal databases, court proceedings, surveys, and opinions related to access to justice, conviction rates, the existence of applicable laws and by evaluating the relevant constitution of the country that can directly impact the return on business investment and international exchanges in cultural, economic, and academic pursuits.
Velocity Country Risk Framework
- Authoritative Source | Active Monitoring of Risk Events
- Robust Data Collection | Processing
- Comprehensive Global Coverage Jurisdictions | Emerging Risks
- Granulated Risk
Categorization | Adaptive
- Sophisticated Quantitative
“At its core, the Velocity Country Risk Score model is a stand-alone reality driven comprehensive risk management tool that can be used by all institutions.”
The velocity CRS model is based on a modular and transparent methodology. The CRS can be adjusted and updated in real-time based on significant events, such as regulatory regime adverse rating, narcotics sanction, terror sanction, credit downgrade, terrorist attack, or corruption conviction. Moreover, the methodology is based on multiple layers, where each additional layer captures an amount of risk reflected in the final score. Due to the highly modular and transparent equation-driven calculations that the CRS model employs, all risk dimensions are readily apparent to the user, providing significant flexibility in either including or excluding a specific risk dimension, based on the user’s application requirements.
The CRS model is distinguished by its one-of-a-kind incorporation of both quantitative survey results and qualitative experiences, resulting in the CRS being comprehensive and expansive. The scoring model captures an expansive set of risk dimensions while being both inclusive and modular so that no single criteria can predominate over the other. The methodology augments actual statistics with perceptions.