1. Introduction
2. Data sources
3. Calculation
4. Current RRI, Peak RRI, and RRI Change
5. Back-calculations
1. Introduction¶
The RepRisk Index (RRI) for Country-Sector combinations (Country-Sector RRI) quantifies business conduct risk exposure in the corresponding country-sector pairings.
The index is based on business conduct risk incidents in the RepRisk dataset and was the outcome of a joint research project with the Zurich University of Applied Sciences, co-funded by the Commission for Technology and Innovation, a key instrument of the Swiss federal government’s technology policy.
Updated daily, the RRI gives accurate, dynamic information on risks and how they impact companies doing business or investing in a specific country and sector. It provides meaningful insights into potential financial and compliance risks such as human rights violations, poor working conditions, corruption, and environmental degradation associated with geographical areas and business activities.
The RRI ranges from zero (lowest) to 100 (highest). The higher the value, the higher the risk exposure:
- 0-24 generally denotes low risk exposure
- 25-49 denotes medium risk exposure
- 50-59 denotes high risk exposure
- 60-74 denotes very high risk exposure
- 75-100 denotes extremely high risk exposure
2. Data sources¶
RepRisk dataset¶
The RRI draws on the RepRisk dataset - the world’s largest database of risk incidents associated with companies and projects. To gather information on incidents, RepRisk leverages machine learning and curated human analysis to screen a large number of public sources and stakeholders daily. Reports on risk incidents are synthesized based on a strict, rules-based methodology. Read RepRisk’s full methodology.
Each incident in the RepRisk dataset is rated based on severity, reach, and novelty:
- Severity [1, 2, 3] reflects the harshness of the risk incident or criticism; where [3] denotes a very severe risk incident or criticism and [1] denotes low severity.
- Reach [1, 2, 3] of the information source (influence based on readership/circulation as well as by its importance in a specific country); where [3] denotes high reach and [1] denotes low reach.
- Novelty [1, 2] reflects the newness of the issues addressed for the company, i.e., whether it is the first time a company/project is exposed to a specific issue in a certain location; where [2] denotes the first time a company is exposed to this issue and [1] denotes repeated occurrences.
| Story ID | Incident Date | Severity | Reach | Novelty | COMPANY Name | Related Country | Related Sector |
|---|---|---|---|---|---|---|---|
| 8258697 | 2022-05-09 00:00:00 | 1 | 1 | 1 | OBB Group (OeBB; Austrian Federal Railways) | Austria | Industrial Transportation |
| 3504680 | 2021-01-27 00:00:00 | 1 | 2 | 2 | Petroleo Brasileiro SA (Petrobras) | Brazil | General Industrials |
| 8233359 | 2022-02-22 00:00:00 | 1 | 1 | 2 | Cime Adventures | Canada | Travel and Leisure |
| 3439525 | 2021-01-22 00:00:00 | 1 | 2 | 2 | Ferrumlend; OOO | Russian Federation | Construction and Materials |
| 8153528 | 2021-08-06 00:00:00 | 2 | 1 | 2 | Kraft Group LLC; The | United States of America | Paper |
| 8271707 | 2022-05-31 00:00:00 | 1 | 1 | 1 | CaixaBank SA (formerly Criteria CaixaCorp SA) | Spain | Banks |
| 7998873 | 2021-05-02 00:00:00 | 1 | 1 | 2 | Twitter Inc | India | Media |
| 8224955 | 2022-02-01 00:00:00 | 1 | 2 | 1 | Dovgan GmbH | Germany | Food and Beverage |
The Country-Sector RRI for a sector $s$ in a country $n$ at time $t$ is calculated as a linear combination of the relative average severity among the sectors in the country $n$ and the corresponding Country RRI at time $t$. Country-Sector RRIs thus oscillate around their respective Country RRI.
$$ \text{Country-Sector RRI}_{n,s,t} = \varnothing \text{Severity}^{\text{Rel}}_{n,s,t} + \text{Country RRI}_{n,t} $$
- $\varnothing \text{Severity}^{\text{Rel}}_{n,s,t}$ : The relative average severity for a sector $s$ among all the sectors in a country $n$.
- $\text{Country RRI}_{n,t}$ : Country RRI for a country $n$ at time $t$.
3.1. Relative average severity¶
First, we calculate the average severity of the incidents in the last two years. The average is time weighted – i.e., newer incidents receive more weight in the calculation. Then, we calculate the relative average severity by deducting the weighted average of the average severity among the sectors in the same countries.
An example of the calculation of the relative average severity for a sector B in a country A with 11 incidents in two years is illustrated below:
| Story ID | Incident Date | Related Country | Related Sector | Severity | Severity Weight | Time Weight as of 2020-12-31 | Severity Weight x Time Weight |
|---|---|---|---|---|---|---|---|
| 389669 | 2019-01-05 00:00:00 | A | B | 1 | 8 | 0.01 | 0.08 |
| 404579 | 2019-02-21 00:00:00 | A | B | 1 | 8 | 0.06 | 0.48 |
| 431010 | 2019-03-05 00:00:00 | A | B | 2 | 16 | 0.07 | 1.12 |
| 510530 | 2019-03-28 00:00:00 | A | B | 2 | 16 | 0.1 | 1.6 |
| 663449 | 2019-05-14 00:00:00 | A | B | 2 | 16 | 0.15 | 2.4 |
| 1151720 | 2019-11-07 00:00:00 | A | B | 1 | 8 | 0.33 | 2.64 |
| 1523390 | 2020-01-24 00:00:00 | A | B | 1 | 8 | 0.41 | 3.28 |
| 1535465 | 2020-01-27 00:00:00 | A | B | 1 | 8 | 0.42 | 3.36 |
| 2327057 | 2020-06-08 00:00:00 | A | B | 1 | 8 | 0.55 | 4.4 |
| 2588719 | 2020-07-27 00:00:00 | A | B | 1 | 8 | 0.61 | 4.88 |
| 3313714 | 2020-12-24 00:00:00 | A | B | 2 | 16 | 1 | 16 |
| Sum | 3.71 | 40.24 | |||||
| X := Average weighted severity as of 2020-12-31 | |||||||
| 10.85 |
Assuming the weighted average of X across the sectors in the same country = 8.85, the relative average severity becomes:
$$\varnothing \text{Severity}^{\text{Rel}}_{n,s,t} = 2.5 \times (10.85 - 8.85) = 5$$
- Note: The exact time-weight for an incident with the time difference (in days) between the publication date of the risk incident and the RRI calculation date is illustrated below:
3.2. RepRisk Index for Countries¶
The Country-Sector RRI also draws on the RepRisk Index for Countries (Country RRI). For more details, please refer to the Overview of Country RRI.
4. Current RRI, Peak RRI, and RRI Change¶
The RRI, or "Current RRI", reflects the current level of media and stakeholder attention business conduct issues are being given in a certain country and sector.
The Peak RRI is equal to the highest level of the RRI over the last two years – a proxy for the overall business conduct risk exposure to issues within a country and sector.
The RRI Change or Trend shows the increase or decrease of the RRI within the past 30 days.
5. Back-calculations¶
To ensure an optimal risk estimation, the RRI is based on all data points currently available in the RepRisk dataset. Back-calculations may thus be performed in case new, previously not considered, incidents are added. For example, the RRI of the country-sector combination $A\text{-}B$ on day $t$ will first be calculated on day $t$ but may be recalculated later, if new incidents impacting the initial calculation are added.
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