Global Private Equity Risk Index Highlights Risky Insight From Digital Chatter

In today’s highly volatile business environment, private equity firms are focused on both maximizing value creation and managing value preservation in order to ensure future limited partner funding. Digital chatter is emerging as an essential capability in private equity firms’ battle to reach their investment objectives.

As the term implies, digital chatter is the summation of online conversations that take place across the surface, deep and dark web. Analyzing this digital chatter at scale has become invaluable in proactively identifying risky events and threats across the whole private equity deal lifecycle. These risk events include environmental impacts, social issues, governance failures, financial instability and cyber attacks.

The Kroll Global Private Equity Risk Index provides vital insight on risks facing the world’s 300 largest PE firms. Risk levels are measured quarterly and based upon the risk signals found within digital chatter representing the summation of conversations happening online.

This also inspired us to formally provide private equity risk detection services in the form of digital chatter due diligence and digital chatter risk monitoring for our clients. You can read more about Kroll Private Equity Risk Detect here.

According to our analysis, digital chatter relating to risk events was detected, on average, 185 days before the incident peaked on notable mainstream media coverage. This delta represents vital time to prevent or mitigate damage to entities associated with the firm, including its reputation, its assets and especially its executives.

The following chart shows the wave of digital chatter that happened in the days leading up to, and following, an actual risk event. However, as often is the case, a revealing trail of risk signals preceded this trending topic. It’s in the “white space” that occurred in the weeks and months before the damaging wave of digital chatter materializes where private equity firms can gain an early-warning advantage over an emerging risk event.

Understandably, private equity firms struggle to keep pace with digital chatter. There’s simply too much of it, moving too quickly, across too many social media platforms. This leaves little time to detect and react, let alone validate whether or not the information is credible.