How to Not Get Caught by Surprise on Outbound Investment Sanctions

The new outbound investment regulations will reshape the world of compliance, necessitating that companies ready themselves for a more volatile global landscape. In this final article of our three-part series, we will delve into how you can best prepare for the coming changes. 

How Can Companies Prepare? 

It is crucial that companies understand that the world of global investments and securities is increasingly becoming politicized. These changes are a long-term reality, and the notion of the separation between business and politics is never going to return. Companies must incorporate national security considerations into their risk assessments when engaging in business activities, both on a local and global scale.

To appropriately incorporate the national security views into business operations requires a clear company risk appetite, a cohesive internal control and decision making infrastructure combined with the right information, both in data and risk analysis support, to make the correct decisions of what is “in” and “out” of our risk appetite.

Risk Appetite and Assessment, Easier Said than Done? 

The first place to start when examining any coming sanctions change is to obtain an overview of your company’s current risk exposure, and to conduct a comprehensive risk assessment of existing exposure against the coming restrictions.

  • What is the nature of the exposure? Where is it located? In what sectors?
  • How much of the company’s business activity is impacted by these investments? How many employees and fixed capital interests? How much investment/revenue is related to the impacted activity?
  • Decide what level of risk the company can stomach. Following the law as written may be possible, but it will constantly change and require substantial investment to ensure lines are not being crossed. Making policy decisions early to limit exposure is an easier approach but means ceding business to the competition.

A company’s risk appetite should incorporate a frank assessment of how much the firm is willing to invest, as well as maintain a comprehensive and uniform internal decision making structure that has the right competency and information to make the right decisions. Sanction Advisory exists because this is the biggest challenge that Nordic companies face and it is not something that is easy to fix internally.

Cohesive Controls and Decision Making

The next step is then to establish a robust controls and decision making framework to be able to conduct thorough due diligence on the current exposure and any future exposure at the pre-investment stage. This is to determine whether the investments are impacted by the regulation or outside of the company’s risk appetite decision.

The program will encompass the comprehensive risk assessment to gauge the political and regulatory dynamics in the short, medium and long term, along with developing possible scenarios and guidelines for the company’s course of action in each specific situation. The aim of the internal framework is to have clear concise and easy-to-implement risk decisions, that adhere to the firm’s risk appetite and don’t result in repeated exemptions and exceptions in the continuous pursuit of new risky business.

Data and Risk Information

The third necessary component is having the right data and risk information to inform the internal controls to ensure your company remains on the correct side of your risk appetite decision.

Your company needs to be able to answer the following questions to prepare and live with the coming world of outbound investment screenings: 

  • Is the security/counterparty currently targeted for restrictions? Is it in the cross-hairs of likely future restrictions?
  • Is the security/counterparty working with any entity, country, or in the sectors that implementing bodies have deemed a national security risk?  
  • Is the security/counterparty owned, controlled, or related to companies that have been targeted by sanctions, are tied to the military or intelligence apparatus of targeted countries or in the sectors that have been deemed a national security risk?

The only way to answer these questions is through having the best data and best horizon scanning risk advice.

  • Your company will need the global scope of all ISINs;
  • Reliable details of their complete ownerships and control and connections to sanctioned parties, government agencies, and other national security threats and;
  • Coverage for the sanctions regimes of the G7 and other locations where your firm has operations.

Finding the right data is a challenge, there are an increasing number of potential data providers in the market but we find that our partners at Kharon have the best solution. Having the right data is only part of the battle, each company needs to know how to use the data, how to implement its use in your company’s screening system and control framework, and also to understand that the political landscape and rules are constantly changing. Having regular tailored horizon scanning advice is also essential to not be caught by surprise.

If you or your company need some help preparing for this complex future of outbound investment screening, from risk assessment support to advice on commercial data providers, contact us via, and we can discuss your needs and the right solutions for your small, medium or global firm.