A recent survey of more than 1,100 compliance, risk, procurement, operations and legal professionals commissioned by Thomson Reuters found respondents said their organizations are conducting due diligence on just 62% of their suppliers, distributors and third-party partners.
Professionals from organizations based in Australia, Brazil, China, France, Germany, India, Singapore, UK and the United States together managing a total of 9.4 million third-party relationships around the world were queried to better understand what they are doing to manage supply chain compliance and to determine whether the benefits and implications of having robust due diligence processes in place outweigh the consequences of not having an established risk-based approach.
Key findings from the survey include:
1. Setting the Scene
The current business environment is increasing both the benefits and risks of third party relationships.
- 74% say that third-party relationships have enabled their company to be more flexible and competitive
- 65% think that the current economic climate is encouraging organizations to take risks in relation to regulations to win new business
2. The Third-Party Risk Landscape
Companies are not as knowledgeable about current risk and regulation as they would like to be.
- Nearly half feel they are not sufficiently knowledgeable about the risks they face
- 14% of third-party risk management professionals do not use the Foreign Corrupt Practices Act (FCPA) to inform their decisions and 13% are not even aware of this legislation
3. Preparation, Perception and Punishment
Perceptions about third party risk and its consequences do not always match the reality.
- Due diligence is conducted on approximately 62% of third parties
- 56% feel that they are unlikely to be prosecuted if they breach regulations
- 92% increased spending on compliance after experiencing an enforcement action
4. Current Process
Respondents to the survey are using a range of risk management strategies.
- The main drivers for due diligence are compliance with regulation and managing reputational risk
- Only 36% are fully monitoring for ongoing risks
5. Identifying the Gaps
Organizations are working hard to address risk, but there are obstacles to overcome.
- Nearly two-thirds know where risks may occur but struggle to detect them
- A lack of budget, time and data is the main challenge
6. Building a Safer Future
Third-party risks will continue to rise, but they can be successfully mitigated.
- 77% expect the time and resources spent on third party due diligence to rise next year
- 80% of compliance professionals believe their personal liability will increase
That report concludes by saying that: “With the right processes, expertise and intelligence companies can not only better manage their risks, but unlock valuable benefits: cutting compliance costs, building reputation and shareholder value, and being better able to retain customers and key staff. Far from being something to fear, risk can provide opportunities to outperform peers and build a sustainable future for your business.”
Click here to download the report (registration required).