Too many organizations are still exposed to risks such as bribery and corruption from their suppliers, distributors, agents and other third parties. An extensive survey by Thomson Reuters highlights the shortcomings and challenges firms face.
The survey found that only 62% of organizations are conducting due diligence on their third parties. And just as worryingly, 61% have no idea about the extent to which third parties are outsourcing their work.
These are just two of the key findings after surveying more than 1,000 professionals in compliance, procurement, and operations in nine countries on how they manage third party risks such as bribery and corruption and modern slavery.
The financial impact of organizations not complying with regulations and suffering damage to their reputation as a result has never been greater. But such is the pressure in organizations that 63% of all survey respondents described winning new business as a priority and that as a consequence they might breach regulations.
This may also be tied to the perception that organizations think they are unlikely to be prosecuted if they did breach regulations, as over half of survey participants agreed with this particular statement – 61% in the United States and 56% in the UK.
Even so, recent enforcement actions, in particular from the FCPA, suggest that regulators are taking enforcement seriously.
The survey respondents who have had enforcement actions taken against their organization were quick to act, with 92% increasing the amount their organization spends on compliance after experiencing an enforcement action.
This suggests it might not be that organizations are reluctant to take action on third party risk, but that they need to understand the impact first. This invisible nature of third party risk means that, unless actively sought out, companies may only see it when it’s too late.
Our survey showed that there are significant benefits from working with third parties, including helping companies be more competitive.
Over seven in 10 claim third party relationships have allowed their company to be more flexible and competitive.
Carrying out thorough third party due diligence not only ticks the regulatory box, but it also helps mitigate against reputational damage, financial risk, and data security, and enables organizations to operate more efficiently and drive business growth.
In order to continue reaping the benefits from both supplier and third party relationships as well as mitigate risks, the survey respondents cited the following challenges they are facing and looking for support on:
Download the report and use it to benchmark your organization against current due diligence practices and to help identify areas for improvement.
Shaun Sibley is the managing director of Supply Chain & Commodities at Thomson Reuters. In this role, he is responsible for leading the creation of unique and trusted services that empower risk & compliance, supply chain, and commodities professionals to act with confidence within complex supply chain networks and business relationships. Prior to this position, Shaun was responsible for commodities product strategy from 2001 to 2005. During this time Shaun also led two new business initiatives through the Thomson Reuters Incubator Lab focused on aggregated OTC trading capabilities and the creation of an Intellectual Property Exchange. Shaun is also the lead inventor of the “System for Multi-Leg Trading” patent. Shaun has worked at Thomson Reuters since 1992 in a range of product management and business management roles based in London, New York, and Toronto. Shaun holds a degree in Physics from the University of Kent. More recently he participated in INSEAD’s Leading for Results program in Fontainebleau, France.