Investing in today's global market comes with its fair share of risks, with familiar concerns such as sanctions, regulatory compliance, and geopolitical issues taking centre stage.

However, based on a recent poll with some of our asset management clients, there is a growing recognition among compliance teams of the significance of culture as a key area of focus, as well as environmental, social, and governance (ESG) factors.

This post explores the evolving risk landscape and identifies the following areas of focus for asset management teams:

  • Sanctions, regulatory compliance, and geopolitical risks: Sanctions have been a topic of discussion since Russia's invasion of Ukraine, and their impact on global business cannot be underestimated. Investors are increasingly focused on trade compliance, including sanctions and export controls, with 41% of respondents in a recent poll highlighting this as their primary concern. Similarly, regulatory compliance remains a top priority, given the constantly changing requirements that demand meticulous attention.
  • Culture and ESG considerations: Beyond traditional risks, investors are increasingly recognising the importance of culture and ESG factors when evaluating investment opportunities. Approximately 35% of investors polled identified culture as a significant focus, acknowledging the impact of corporate values and ethics on long-term success. Additionally, 24% of respondents highlighted insider trading as a key concern, emphasising the need for transparency and integrity within organisations.
  • Full life cycle compliance: Investors are now placing greater emphasis on compliance throughout the entire life cycle of an investment, rather than solely relying on due diligence. While due diligence remains important, with 53% of investors prioritising it, there is a growing focus on investment onboarding and monitoring, with 18% each dedicating attention to these stages. Furthermore, 6% of respondents recognise the significance of exit strategies, ensuring compliance even when divesting from an investment.
  • The DOJ's M&A safe harbor: The U.S. Department of Justice's (DOJ) M&A Safe Harbor is a recent development that warrants attention. However, early polling suggests that a significant proportion of investors may not be fully aware of its implications. Approximately 47% of respondents admitted to lacking complete awareness, while 41% believe that this development will not significantly impact their compliance due diligence and monitoring efforts. However, this trend could be that investors are already conducting extensive due diligence and monitoring even without this recent development.

Investing in today's global market requires a thorough understanding of the risks that can impact investment success. While sanctions, regulatory compliance, and geopolitical factors remain top concerns, investors are increasingly recognising the importance of culture and ESG considerations.

Moreover, ensuring compliance throughout the full life cycle of an investment is gaining traction, with due diligence, investment onboarding, monitoring, and exit strategies all playing crucial roles. It is essential for investors to stay informed and adapt their strategies to navigate these risks effectively.

Ropes & Gray's anti-corruption and international risk attorneys work with clients across industries and geographies to identify risks, ensure compliance, and defend against government investigations. Please reach out to our team to further explore the considerations discussed here.

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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.