Companies in the technology sector 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.
- The technology sector is exposed to a range of different risks. Many of these relate to third parties and may be hidden deep within vast, global supply chains.
- Companies within the sector operate in a highly competitive, fast-paced environment and need to be able to identify and mitigate regulatory, operational, financial, cyber and ESG-related risks quickly and efficiently.
- Advanced technology and tools can significantly help industry players to manage identified risks and make better decisions around third-party relationships.
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Third-party risk in the tech sector
Tech companies are typically exposed to a range of different risks that may be hidden deep within vast, global supply chains.
It is therefore vital that companies in this sector understand the nature of these third-party related risks, so that they can proactively identify and manage them. Any failure to do so can quickly lead to potentially serious financial, legal and reputational consequences.
These are the findings of a new expert talk from Refinitiv, which unpacks the unique challenges faced by companies in the tech space, an industry characterised by a rapid pace of business, quick turnaround times and relentless competition, where newer versions of products and services are continually being developed.
Types of third-party risk
Our expert talk goes on to discuss some of the most common types of risk impacting the tech sector, including:
Operational risk can take different forms. For example, the rapid pace of innovation that characterises the industry means that the timely arrival of materials and the efficient transport of final products are key to success. Disruptions to expected timelines can introduce significant operational risk.
Financial risk is always present to a greater or lesser extent but can be significant in the tech industry. This is because metals and minerals are key input materials within the sector, and they are often subject to significant price volatility, which can impact financial viability in an industry known for thin profit margins.
The tech industry thrives on real-time ordering and, for this reason, the information systems in technology supply chains are frequently interconnected. While this improves efficiency and speeds up processes, it also exposes all parties in the chain to additional risk, because a breakdown in cyber security at one company can potentially impact the entire chain.
Reputational risk impacts all industries, and the tech sector is no exception. This risk is attached to any association with any third (or fourth) party linked to any form of illicit activity, or financial or environmental crime.
All companies should assess the ESG standards of their third parties. In the tech space, specifically, where metal suppliers form an integral part of the supply chain, companies must ensure that the proceeds of metal sales are not being used to finance financial crime or any form of illicit activity.
Tools for optimal risk management
Refinitiv has developed a range of market-leading solutions that equip tech companies to accurately identify and holistically manage third-party risk.
Read the full expert talk: Third-party risk management; Spotlight on technology