When Graham Welland decided to set up his own business, it’s fair to assume he had a different attitude to risk to most other business founders. As a risk expert, he was at least able to assess potential threats and challenges he’d face better than most.
Not long before launching risk consultancy GWCI, he had advised his previous employer – one of the large water companies – on the major compliance risks they faced. The company objected to most of his proposals on cost grounds and not long after he submitted his report the company was hit with two hefty fines for breaches Welland had identified. Rather than a sense of triumph, he was rewarded with redundancy. The launch of GWCI was the result.
Over time it had become clear to Welland there was a need for companies to receive better advice on risk, compliance and due diligence. And he knew this need was global in scale.
“The company was set up to essentially look at due diligence across the world,” explains Welland over a Teams call.
“We were looking to help companies, particularly UK entities that trade from the UK overseas, to bring transparency to their deals and supply chains and to help them understand who they are dealing with.”
To do this GWCI offers a range of reports and other, more in-depth services, from a basic sanctions watchlist check, through to more advanced and in-depth reviews that include experts on the ground in the relevant country.
“We put boots on the ground if clients want to do audits or need face-to-face meetings,” explains Welland.
“The checks we run can be on individual directors or entire companies, or they can be on a market or country level.”
Beyond finance
Simon Dexter-Jones, GWCI’s head of global sales – also on the call – adds that the service the company offers is a natural extension to financial due diligence that many companies already do.
“I've been an export sales manager for close on 30 odd years. And for what we do is a natural progression from the fact that as an export manager I was always trying to build relationships and partnerships; to work over the long-term with distributors or agencies.
“But the focus was always on making sure you got paid. You made sure you got letters of credit in place.”
All the effort was, explains Dexter-Jones, focused around these financial checks. The only reputational checks done were relatively light-tough references on the people you dealt with. He saw that changing trade landscape meant that was no longer enough.
He describes the detailed understanding you need of potential trade partners as a jigsaw.
“You need to get as many pieces as possible of the jigsaw in place, so you can really understand who you are dealing with or who you’re looking to deal with. Because most export managers won't be going in for one hit, but are looking for longevity in relationships, they want to know more about the people they’re dealing with.
“And not just their current company, but the history of the directors and where they’ve been before.”
For both Welland and Dexter-Jones the aim is to help more companies understand the risks they face giving them more confidence to take the leap into exporting. The more information you gather, the more you can protect yourself for the short, medium and
long term.
Better compliance is a good thing
Welland says the increasing amount of compliance regulation in some ways makes what they do easier.
“These days, we look at policies and procedures as well and what these companies claim and assess whether they are correct and true. Things like anti-bribery and corruption laws are becoming more integrated throughout the world.”
Company registration and an understanding of ultimate beneficial ownership can help, says Welland.
“When we unwind these ownership chains, it becomes obvious to our clients that the person they're dealing with is often not from that local company, but can end up a long, long way away.”
The power of reputation
Welland’s experience with the large water company taught him that the real damage is not financial, but reputational.
“It was a big business and they could easily swallow large fines,” he says.
“The thing that bit the most was they soon realised the impact it was having on their brand and reputation. This happened years ago but they’ve never recovered from it. I knew then that I could help businesses understand their reputational risks and help
them make better decisions.”
Dexter-Jones says most clients come to them having done some initial desk research and knowing which country or company they want to work with.
“We'll feed them back the information on that, but we won't steer them by saying ‘don't talk to these people’. We're just giving them facts so they can then make their own decisions. But we’ll put hints forward as to what they should think about looking at if they are going to carry on down this route.
“But we're not saying you should be dealing with XYZ over here or XYZ over there. They come with fixed ideas of who they want to deal with, which company and if they know the directors, which directors they want us to look at.”
Welland also highlights the country profiles they offer, using the example of a client who was looking to invest in Angola.
“They were looking to trade into Angola and to set up a business there and wanted to see what the future held for Angola and whether it was safe as an investment. They were going to spend £10m in the country.
“It was a difficult one, seeing into the future. But we did a report and it worked out well. They invested based on that and they've been there for three years and it's going well.”
Trade in uncertain times
Welland admits that increased uncertainty is something of a bonus for any risk advisers. And recent years have been relatively kind to his trade risk consultancy. There are more export controls and sanctions in place, as well as uncertainty caused by war, Brexit and the pandemic.
“Brexit bought some interesting things for us,” he says.
“We were focused on the Commonwealth countries at that time because the UK was looking that way, not for the first time, but more intently than they had in the past. That’s meant a lot of trade out there is going into countries where people haven’t traded
before. So Brexit's been kind to us.”
Dexter-Jones agrees that the business has seen more companies looking at new markets, which are perhaps at the riskier end of the spectrum.
“Rather than just doing business with Europe, they're looking over at the Far East, Africa and South America. People are looking at places they haven't looked at before because they think there might be a new market there.
“They might be the first company from their sector there. There's an inherent risk in that because they really don't know the market and their competitors don't know it very well either. But the potential is huge in some of these markets.”
Better compliance, better trade
Welland says that another change, which again he sees as a positive for his business, is an increase in compliance legislation.
“There’s a lot of legislative change coming through, both in this country due to Brexit and elsewhere. It's a ‘watch this space’ situation to see where that goes. We’re seeing more focus on the ethical things such as modern slavery and health and safety.
“Those sorts of issues are starting to really bite more. For the first time there is some regulation to back these things up and give them some teeth.”
He says that this will initially mostly affect larger businesses, because people notice when these firms get fined and “They’re the ones the regulators look at first, “ he adds.
But these large firms also need their supply chains to be squeaky clean, so these new regulations will eventually find their way down to even the lone person at the bottom of the chain somewhere along the line.
“That's what people haven't realised yet,” says Welland. “It might not affect your business directly now, but it will eventually find its way to you at the end of that chain.”
Reputations are more vulnerable than ever
Welland and Dexter-Jones agree that there is a challenge in a world driven by social media. For a start it requires more rigorous checking to make sure what’s presented as “fact” is true.
“The only way you can do that is to build up profiles and get answers from as many sources as you can. We'll check multiple sources to see if they’re saying the same thing. There's so much fake news out there that you've got to be careful,” says Welland.
“We live in a very integrated world now and reputations can change in seconds. We spend a lot of time now looking at the social media side of things see what people are saying and doing and we’re looking around those edges to see what peer group pressures
there are and what’s the norm for that industry or that market.”
Dexter-Jones adds that the GWCI approach is also complemented by its focus on human analysis.
“It’s worrying that there is so much information out there, but our human analysis is where we’re very strong. We've got some very skilled people who can follow the threads and realise these threads are going nowhere or it's going somewhere important.
That's quite an advantage for us.”
But Welland adds that, as with other sectors, there is also a role for more automation. Although he admits it can become a bit circular when you are using AI for risk analysis.
“You have to ask, how risky is that? But what AI can do is amazing. We subscribe to search engines that do some background searches for us. Personally, I think there will always be that need for interpretation.
“There will always be a need to go and dig out that extra bit of information. Where automation is useful, it only take it to a certain level, then we add a human layer to use that information.”