Damage limitation: how to stop setbacks becoming fatal

Fears of brand damage and increased regulatory scrutiny have placed due diligence at the top of private banks’ agendas, while money laundering issues and allegations continue to buffet the industry. 

Being exposed to illicit sources of funds is a key concern for banks, says Peter Wilson, CEO at Herminius, a strategic advisory firm offering due diligence, market entry and anti-money-laundering services to private banks, private equity firms and multinational companies.

When reviewing high-risk potential clients, a growing number of private banks are prepared to invest considerable time and resource in due diligence to satisfy themselves on the legitimacy of origins of wealth, refusing to bank the prospect when they cannot account for it. 

His firm’s clients include “some of the well-known Swiss private banks”, with the head of compliance being the first point of contact. “One important element we bring is objectivity and independence,” he says, explaining he charges a fixed fee, whether the deal goes ahead or not. 

To produce in-depth reports, the firm relies on a network of locally-based experts around the world, typically journalists, industry analysts, former public servants, academics and retired diplomats. 

 “Our clients tend to bring us in when they find it difficult to get the whole story through publicly available information and open sources databases, or when there is no paper trail, as they are going further afield to find new clients,” says Mr Wilson, a former diplomat.

An objective picture of how a wealthy individual or family has made money over decades may drive a client not to pursue a specific deal, but also offers huge unexpected opportunities. 

“By getting the full story, we can enable deals to go ahead, which may have been ruled out by a more naïve database check or by having a blanket check against a certain country or business sector,” he explains.

And if the damage is done, how can a firm restore its tarnished image?

“A firm has to face up very quickly, has got to say sorry and put it right. What you can’t do is go and hide in a dark corner hoping it will go away,” says private banking training consultant Kim Cornwall.

Communication is also key. “The one thing you have to learn is to communicate through a crisis,” adds Coley Porter Bell’s partner, branding consultant Helen Westropp. 

Other industries offer enlightening insights that such a strategy is effective. Brands like Toyota, BP and Volkswagen have experienced up to 15 per cent declines in value in the year when brand damage occurred, although most recovered in the long run, explains Mike Rocha, global head of Interbrand’s valuation practice. 

The brand that managed to recover the fastest, from its Note 7’s battery explosions crisis in 2016, was Samsung, which did not lose any value in the Interbrand global brand ranking. 

“What Samsung did was really best in class,” recalls Mr Rocha. “They apologised very quickly and communicated regularly and very transparently, first on their search to identify the problem and then on what they were doing to rectify it. This helped foster trust.”