I believe increased transparency could change the future of the diamond industry. There are two main types of transparency now needed - pricing transparency and operational transparency.
The diamond industry has come a long way since the time when there was little standardisation to describe diamonds. The GIA has created a terminology which has become the common language spoken within and beyond the corridors of the diamond industry. The 4Cs have become a well-known term used by both sellers and buyers through the entire diamond pipeline, but this is not enough. There is much more beyond the 4Cs that has to be taken into consideration when pricing diamonds.
On top of the standard 4Cs, a certificate’s additional data must be considered to provide more information, which expands our ability to price a diamond. This is an additional layer of facts about a diamond.
It may be the location of an imperfection, the exact measurements of a diamond, the level of fluorescence, the various comments and key to symbols mentioned on a certificate and even the lab providing the certificate. All these and many more elements impact the final price and value of a diamond. I see a growing need to formalise a modern and comprehensive pricing system.
This of course comes in addition to an important need in the market. A standardised and uniform grading system and a clear and transparent pricing system are crucial because there are several labs which grade diamonds and their reports vary. Creating a fully transparent pricing system will enable the industry to enter a new era with confidence. It will be an era in which diamonds will be considered a way to preserve wealth and buyers will have what they need prior to buying a diamond - full pricing transparency to make informed purchase decisions.
It does not end with pricing transparency. Operational transparency is required in order to create reliability, confidence and trust so that banks can properly evaluate the risk they are taking when lending money to the diamond industry. Banks providing credit have risk standards and regularly pose questions about how businesses operate.
Banks themselves are undergoing a period of change and their clients are now directly affected. Basel III, a recently introduced global banking standard, requires banks to become more stable with a lower lending to asset ratio. As a result, banks are demanding a new level of transparency from their clients, to ensure they can comply with these new standards, and they repeatedly remind clients of this increased need for transaction and operational transparency.
The good news in that this operational transparency will also contribute towards a better understanding between the diamond industry and governmental authorities. This is essential if the diamond industry wants governments to adopt new tax regimens, provide it with incentives or support sweeping changes aimed at improving competitiveness.