Know your customer!

Are you risking your reputation?

Johannesburg, 18 Oct 2017
Read time 3min 20sec
Lizette Sander, Product Manager, Bateleur Software.
Lizette Sander, Product Manager, Bateleur Software.

"It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you'll do things differently," said Warren Buffett. There are a number of companies that can confirm as much after bad choices of customers left them in deep trouble. Yet it is surprisingly easy to end up in that muck without even realising the road is no longer solid.

Preserving and maintaining a company's reputation is one of the biggest challenges and critical to its success.

The identification and verification of a customer is a very critical process in the protection of your organisation's reputation. It's fundamental to understand the financial situation, circumstance and source of wealth of potential and existing customers to get a holistic view of the risk they pose.

Compliance officers who follow clear-cut compliance and corruption rules when selecting and screening their potential business partners, make a substantial contribution to maintaining their company's reputation.

When unethical activity goes unnoticed, particularly when it involves a dubious client, this can quickly become rooted and make the entire organisation culpable, says Lizette Sander, Product Manager at Bateleur Software:

"Unethical conduct is a slippery slope. It can start small, with only a few people in the company knowingly looking the other way. From a distance it wouldn't look suspicious and things appear above board. But when that unethical customer gets found out, the company often lands in the firing line. This is a very bad place to be in and recent news stories show it can even bring down a business."

Know your customer (KYC) and customer due diligence (CDD) are already a fixture at financial institutions, used to verify and track customers against money laundering and other financial crimes. But as the woes of KPMG and a number of other companies recently showed, KYC isn't just to keep regulators happy. A robust KYC system can warn about many different hazards, the type of things that could catch management unawares.

When a scandal breaks, nobody believes that 'rogue elements' are to blame, even if they truly were. Ultimately management will be held to task, as it was their governance responsibility to be aware of such problems. KYC mitigates this considerably.

Yet KYC technology is not only about averting risk. It can be a massive business driver. Ever since companies such as Target have worked out how to convert customer behaviour into up-selling opportunities, the rush for understanding the buyer and predicting their behaviour has become key. Combined with modern analytics platforms and the ubiquitous growth of Big Data, it is clear that a deeper understanding of modern clients is a huge advantage. Cloud platforms are opening new avenues to integrate KYC with business strategy, without the massive costs and overhauls traditionally associated with such systems.

"KYC doesn't only help determine if a customer is high or low risk. It can go much deeper. KYC is being used to power and compliment loyalty card systems, collecting the data to build better services and individual offers. Even though these systems were designed to help companies avoid bad customers and criminal behaviours, they can also deliver positive and strategic information to the business about a customer."

As Buffett said, reputation can disappear in a flash. In very little time, a company can go from king to pariah, from winning to crisis mode. This can be avoided and even turned into a driver for closer customer relationships. If you want to safeguard your company's future and ironclad its reputation, remember to know your customer.

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