Risk Assessment in the Age of Uncertainty

Markets are often seen as dispassionate, responding to a flood of information that ideally brings clarity. However, they are fundamentally shaped by human decision-making, often based on incomplete or inaccurate data. In today’s world, markets are bombarded with so much information key signals are lost in the growing noise.

Under the new administration, hundreds of Executive Orders have been signed, with many of their long-term effects still uncertain. Tensions have escalated with the U.S.'s largest trading partners, and the government has faced interruptions to funding and processes. There are also escalating constitutional concerns as judicial orders are challenged by the executive branch. Additionally, China’s technological advancements—such as the alleged leapfrogging of Silicon Valley AI dominance with the release of DeepSeek—have added further volatility to global markets. And now rumors abound about satellite images of a colossal nuclear fusion facility in China, with potentially profound implications for global energy markets. Amid this uncertainty,  the possibility of a government shutdown looms, with the Congressional Budget Office (CBO) projecting a $1.5 trillion U.S. budget deficit by 2025 if the status quo continues ("The Fiscal Year 2025 Budget and Beyond," CBO, 2024).

For employers, lenders, property managers and landlords, lessons from the previous periods of global uncertainty—the 2007-08 financial crisis and the 2020-22 COVID-19 pandemic—are instructive. Access to and the use of/non-use of timely and accurate information was a key differentiator in both crises.

During the subprime mortgage meltdown, the lack of due diligence in verifying borrower information led to disastrous results, such as the approval of loans for individuals with no income or assets, including the infamous "NINJA" loans (No Income, No Job, No Asset). The 2008 crisis, caused in part by the overextension of credit to subprime borrowers, led to the loss of $7 trillion in home equity, contributing to the largest global recession since the Great Depression (The Financial Crisis Inquiry Report, 2011). This oversight was addressed by the Dodd-Frank Wall Street Reform Act, which introduced rigorous verification standards for mortgage origination. According to a Federal Reserve study, these regulations significantly reduced the incidence of subprime loans after 2010, improving overall financial system stability (Federal Reserve, 2017).

In contrast, the COVID-19 crisis saw swift action to prevent economic collapse as unemployment rates soared. U.S. unemployment peaked at 14.8% in April 2020, the highest rate since the Great Depression (U.S. Bureau of Labor Statistics, 2020). Despite using data to combat the pandemic, a lack of basic verification led to massive fraud in the unemployment benefits system. The U.S. Department of Labor estimates improper payments reached up to $191 billion by late 2022, with figures continuing to climb as the OIG audits grow (U.S. Department of Labor, 2022).

Today the landscape is different. Today, companies like Verify4 provide real-time access to individuals' wage and employment histories, helping to reduce fraud and make systems more equitable. Verify4, the only firm in the U.S. offering this capability, works in partnership with state agencies to offer a solution that enables fairer, more accurate decisions in areas like government benefits, housing, employment, and credit qualification. The introduction of real-time employment data is seen as a major step in preventing fraud and improving the accuracy of decision-making in financial systems. According to a Harvard Business Review report, accurate data verification could reduce fraud by 30-40% in benefits programs (Harvard Business Review, 2021).

Verify4 reports, when combined with traditional credit scores, offer insights into an individual's wage and employment stability—data that can’t be easily accessed through conventional means. This information helps reduce fraud and errors, making it a valuable tool for navigating economic and geopolitical uncertainty.

The best way to mitigate risks in periods of uncertainty is to act sooner rather than later. Learn more about how Verify4 can enhance decision-making and protect your organization from fraud at www.Verify4.com.