The retail sector has gone through a period of change, specifically with the regulatory obligations surrounding their third-party networks. Retailers need to manage and mitigate their third-party risks by using trusted data and advanced tools.
- The retail sector has undergone a period of unprecedented change, both in terms of how people shop and in terms of the regulatory obligations surrounding third-party networks.
- There are six key risks that retailers should be aware of – including operational, identity-related, data and cyber, ESG, financial and reputational.
- Retailers can better manage and mitigate these third-party risks by leveraging trusted data and advanced, tech-enabled tools.
For more data-driven insights in your Inbox, subscribe to the Refinitiv Perspectives weekly newsletter.
The retail supply chain and third-party risk
The fast-paced, highly competitive retail sector is frequently characterised by vast, often international supply networks, as retailers seek to source cheaper raw materials and more cost-effective labour due to tight margins and changing shopping habits.
At the same time, sector players need to be aware of increasing regulatory requirements to ensure that all parties within their networks comply with evolving regulations.
One example is the new German Supply Chain Due Diligence Act, effective 1 January 2023. The act lays out stringent new requirements relating to supply chain due diligence, including enhanced obligations to protect human rights within supply chains.
Our new expert talk unpacks the key third-party risks that retailers are facing and calls out the expanding regulatory requirements governing the information retailers are expected to hold about their third parties.
Unpacking different risks
Typical retail supply chains consist of three broad sections, including supply (from the sourcing of raw materials, through to manufacture of the final product), transportation and logistics, and inventory management.
Each section introduces different risks into the retail equation, but our expert talk focuses on six third-party risks that need to remain high on the radar for retailers:
‒ Operational risk
Operational risk is the risk that supply chain delays or disruptions impact the retailer’s ability to deliver goods on time.
‒ Identity risk
This is the risk that a third party is not who they say they are. Evolving legislation is requiring retailers to gather and assess more information about third parties.
‒ Data and cyber risk
Data and cyber-related risks are present for retailers on two fronts – there is a duty to protect customer data and the retailer’s own data can be at risk once shared with third parties in the supply chain.
‒ ESG-related risk
ESG considerations continue to move to global centre stage and increasingly informs consumers’ decisions about which companies to support. Retailers must ensure that ESG-related breaches – such as human rights violations – are not present in supply chains.
‒ Financial risk
Financial risk can lead to lower margins. For example, unexpected rises in transportation costs may not necessarily be passed on to the consumer in full, leaving retailers bearing a portion of the additional cost.
‒ Reputational risk
Reputational damage is a particular concern for retailers, since they are vulnerable to customer actions, such as boycotts. In the fast-paced and competitive retail space, reputational damage can have lasting consequences.
The right tools and data are key
Successfully mitigating third-party risk and remaining compliant with evolving regulations are only possible with the right data, tools and technology.
We can offer hands-on help through our range of solutions designed to enable retailers to identify and manage third-party risk more easily.
Screening remains one of the cornerstones of robust due diligence since it helps companies to spot potential risk early in the game. Our market-leading World-Check Risk Intelligence database delivers accurate, structured data to power third-party due diligence screening programmes. Whereas our Due Diligence Centre helps to streamline your third-party risk management and make data-driven and risk-based decisions.
We also offer:
- Comprehensive sanctions data – we cover all major sanctions lists on a 24/7/365 basis.
- A wide range of due diligence reports, from snapshots of individuals or entities to detailed enhanced due diligence reports across all geographies.
- Managed services (including managed onboarding and managed screening), helping to reduce cost of compliance and focus on strategic business priorities.
As both risk and regulatory requirements continue to expand within the dynamic retail sector, proactive retailers can leverage trusted data and advance, tech-enabled tools such as these to better manage and mitigate the core third-party risks that impact their operations.
Read the full expert talk here.
