Overview
Risk Level is a level that is based on our conditions for judge how high risk a Legal Entity is. The levels that exist in Lendysoft is Low, Normal and High. The default value for a Legal Entity’s risk level is Normal and could be set High if at least one of the conditions is true of the factors. For now no Legal Entity can get risk level Low.
Factors that judge a legal entity’s risk level is:
- A Legal Entity living in area with a high Risk, based on Zip Code.
- A Company’s line of business is a high risk, based on Standard Industrial Classification Code (SNI Code).
- A Legal Entity is a Politically Exposed Person (PEP)
- Company has a beneficial owner that is a PEP
- A Legal Entity is Sanction.
- Company has a beneficial owner that is Sanction
- Company has a board member that is Sanction
- A Company has related Legal Entity with a High risk level, Signatory for an example.
In Borrower, Lender and Signatory details view in attributes tab a Lendysoft user can set attributes to a Legal Entity. With those attributes the system can calculate which Risk Level the Legal Entity should have.
In the Risk Level tab, Its able to auto calculate the risk level for a Legal Entity that will be based on the attributes that Legal Entity has.
The following attributes that gives Legal Entity High Risk Level is:
- High Risk Zip Code
- High Risk Standard Industrial Classification
- Politically Exposed Person
- Sanction
- Related High Risk Legal Entity
Now all the attributes will get the Legal Entity a High Risk Level, but in the future it could be some attributes that does not be a factor for a High Risk Level.
Every night it goes a job that will calculate every Legal Entity’s risk level depending on theirs attributes. It’s does the same calculation as the button in the risk level tab does, but for every Legal Entity. This means that if the nightly job is active it will overwrite the users manually set Risk Level where they can do in the Risk Level tab in Legal Entity’s detail view.
Risk Level based on registers instead of attributes
Instead of users of Lendysoft goes in and set attributes manually for every Legal Entity the system can do it instead. The solution is to have a register that tells system what makes it a high risk. Example for Zip Code it will be that every Legal Entity that has a Zip Code 12345 should have a high risk and should set the Legal Entity risk level to High and set the attribute High Risk Zip Code.
With other words the Risk Level calculation will look on the register instead of the attribute and set the attribute automatically. It will even remove the attribute if the Legal Entity’s zip code has been removed or changed to normal or low and likewise with the other attributes and registers.
Doesn’t it sound great?
To have the Risk Level calculation based on the registers instead of attributes, Lendysoft need to be configurated. The options are in Risk Level Register view where it can get through the navigations list to admin view and last click is on Risk Level Registers. See the picture below.
In the view there is four registers that its able to navigate through the tabs. A register is linked to an attribute and to get this feature, the check box “for legal entities on nightly batch job” needs to be checked. See the picture below.
To have every attribute based on the register its need to be checked in every tab.
Beware that if a user goes in and change an attribute that have been changed by risk level calculation and if the settings is based on the register, the attribute will go back.
Politically Exposed Person Register
Lendysoft does not has its own Politically Exposed Person (PEP) register so it’s using Lendysoft’s PEP screen result that it got from Trapets PEP register. Risk Level calculation gives High risk level and set attribute Politically Exposed Person if the Legal Entity has any unreviewed or any confirmed IsPEP that is from the latest results. More information you find in KYC Screens what the latest results means.
Sanction Register
About sanction is the same as Politically Exposed Person (PEP) that it’s using Trapets sanction register instead of PEP. Same about the calculation for Risk Level and add the attribute Sanction.
Zip Code Register
Lendysoft users is enabling to add Zip Codes into the register and set a risk level. If a Legal Entity has an Zip Code that exist in the register and its high, the Legal Entity will get risk level High and add the attribute High Risk Zip Code.
Standard Industrial Classification Register
Lendysoft users is enabling to add Standard Industrial Classification (SIC) into the register and set a risk level. If a company Legal Entity has an SIC that exist in the register and its high, the Legal Entityr will get risk level High and add the attribute High Risk Standard Industrial Classification.
On creation of a Legal Entity
When a Legal Entity gets created, either from API or inside Lendysoft, it’s an option if Lendysoft should do a Risk Level calculation or not. The option’s check box is in the Risk Level Register view. The checkbox is next to the country drop down list with the name “Set Risk Level on Creation of Legal Entities”. The risk level calculation is the same as the night job.
The settings need to be configurated for each register as the nightly batch job. It is the first check box, “On legal entity creation”, that tells the system if it should do the check against the register during the creation or not.