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KYC

Risk Profile

A well-defined risk profile is crucial for effective risk management, regulatory compliance and informed decision-making - as it ensures that potential risks are identified and mitigated early, protecting an organization from being associated with financial crimes and fostering a secure and transparent business environment.

A risk profile is a comprehensive assessment that outlines an organization's willingness and ability to take on risk if working with or associated with an individual or company. It evaluates the potential risks associated with a client, investment or business decision - considering various factors such as operational activities and the regulatory environment. In the context of Know Your Customer (KYC) processes, a risk profile helps determine the level of scrutiny and due diligence required for a counterparty or transaction.

Key elements in developing a risk profile include collection of a counterparty’s information, review of their answers from their KYC questionnaire, analysis of the screening results, consideration of other industry benchmarks and the specific risk factors relevant to the legal entity or individual. The summation of this process is to categorize the counterparty into the appropriate risk level (low, medium or high). For organizations, this could encompass the nature of the business, the complexity of its operations, the jurisdictions it operates in, its financial health and its regulatory compliance history. 

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