Companies in the automotive industry need to understand the nature of third-party related risks so that they can proactively identify and manage them while avoiding serious financial, legal and reputational consequences.
- Third parties can introduce substantial risk into automotive supply chains and sector participants need to protect themselves by implementing robust controls.
- A range of different risks typically impacts the sector – companies need to identify and manage each type of risk.
- Developing a sound strategy to mitigate the full range of potential risks is crucial and is best achieved by leveraging the power of trusted data and advanced technology.
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Driving risk in automotive supply chains
A new expert talk from Refinitiv unpacks risk in the automotive industry and finds that, while they add undeniable value, third parties can also drive risk within the sector’s typically large, complex supply chains.
This risk can take many different forms, ranging from quality- and distribution-related risk to the risk of environmental, social and governance (ESG) breaches, the safety of intellectual property, regulatory compliance risks and more.
Companies in the automotive sector can best protect themselves by introducing robust controls to identify third-party risks and thorough due diligence, both at the onboarding stage and on an ongoing basis that forms part of a best-practice approach to managing third-party risk.
Read the full Expert Talk: Third-party risk management: Spotlight on the automotive sector
Separating the links
The automotive supply chain can be separated into four links, and each introduces slightly different risks for other members of the chain. Our expert talk takes an in-depth look at these risks:
Key risks impacting the automotive industry
After unpacking the different links that form a typical automotive supply chain, our expert talk identifies and explains six key risks impacting the sector.
- Integrity risk is the risk that a third party may have links, even tenuous, to illicit activity, for example, the sourcing of raw materials from conflict zones.
- Reputational risk can have devastating implications for auto brand companies. Even if illicit activity is discovered deep within the supply chain, it is the recognisable brand that generally bears the brunt of any reputational fallout.
- ESG risk is high in the automotive industry. Any form of ESG crime within the supply chain – whether this relates to emissions, employee well-being or other concerns – can have far-reaching consequences for the brand.
- Cyber risk within the sector is rising, alongside the increasing automation and leading-edge technology that now define the sector.
- Operational risk can be introduced by supply shortages and the disruption of transport lines, both of which can impact the brand company’s ability to deliver quality products on time.
- Financial risk is always present but can be exacerbated by supply shortages that lead to price increases.
Strategies to manage third-party risk
Developing a sound strategy to identify and mitigate the full range of risks that may be present in automotive third-party and distribution networks is crucial, and thorough screening is an essential first step.
Refinitiv’s trusted data, as well as our leading range of tools and solutions to manage third-party risk, can drive greater transparency and compliance throughout global automotive supply chains.
Given the range of risks that can potentially impact auto manufacturers, developing a well-designed and holistic third-party risk management strategy should be a priority.
Read the full Expert Talk: Third-party risk management: Spotlight on the automotive sector
