The impact of globalization on supply chains now and in the future cannot be underestimated. Often, what leads to mishaps is not the complexity of supply chains but the lack of third party management, transparency and monitoring which is fundamental from the beginning of the supply chain through to the end consumer.
Organizations that are aware of supply chain challenges and — take proactive steps to address them — will be well positioned to ensure their supply chains serve existing customers more effectively, operate more efficiently, penetrate new markets and overall, grow more profitably.
We spoke with Warrick Beaver, ex-Managing Director for Customer & Third Party Risk, on his thoughts on knowing your third party.
Editor: What is a third party and why should organizations have a responsibility to know who they are?
Warrick: By exposing, understanding and then monitoring the many nodes, connection points and related parties involved in a company’s ecosystem, companies can take active measures to ensure that their business is secure and its operations are sustainable at a holistic and bi-lateral relationship level. In addition, in today’s business environment organizations are held responsible for the actions of suppliers, vendors and partners in addition to their own internal activities.
A third party could be any person or organization that is connected to your supply chain or is executing business on your organization’s behalf such as a supplier, distributor, agent and/or partner.
Editor: What are the harsh realities and future market drivers that are impacting the greater need for knowing who you’re really doing business with?
Warrick: Pressure is intensifying for businesses to take proactive measures and responsibility for the conduct of their third parties and in their dealings with them. If third parties are held to a higher standard this can reduce the probability of corruption, money laundering and tax evasion and other activities in the value chain. These activities are not only both morally and legally wrong but also damaging to business and society. Progressive organizations are also looking at pro-active risk management of third parties as a source of competitive advantage and sustainable development, reducing the risk of operational disruption and reputational risk.
By unwrapping the opaque and complex value chain between supplier and consumer or channel partner and broker, we are beginning to recognize that every component has to act in a compliant and responsible fashion for the system to operate optimally.
Through increasing demands for transparency, we are seeing the return of the voice in the customer in how and what they buy or consume and this is having a ripple effect through the value chain including greater government participation.
Editor: How can we help; and what are the benefits for the customers and partners?
Warrick: We are part of a broad alliance with organizations such as Transparency International, the UN Global Compact and NGOs to take an active role in how civil society can fight against corruption and slavery.
We are the custodian and conduit of an unrivalled set of global news, data, analytics and intelligence that can be applied in bringing this transparency to a company’s third party risk program.
Through assessing a company’s third party eco-system relationships against our assets and capabilities with a predefined risk taxonomy and risk based policy, we can rapidly expose areas of concern or opportunity allowing companies to rapidly make decisions and choices based on the dynamic nature of their business and their third party relationships. This means faster decisions, more choices and greater certainty!
Editor: What can you do to further your knowledge on third party risk?
Warrick: In light of the recent Panama Papers exposé, corruption has been thrown into the spotlight but in isolation of this event the fight was already being driven with renewed vigor as a result of a number of high-profile initiatives leading up to the forthcoming London Anti-Corruption Summit on May 12. One of these is the Tackling Corruption Together conference on May 11 where global leaders from civil society, business and government will gather together to discuss what they can do to tackle the problem. We are a key partner at this event.
In addition, to keeping abreast of initiatives I would recommend that anyone dealing with third party risk in their company understands the international regulatory framework in this field.
You can also find resources on our website that I have found must reads on the subjects that surround third party risk.
As issues like slavery are becoming more mainstream, customers and the media are paying much more attention to them and major newspapers like The Guardian have now dedicated pages to the sustainable supply chain, which I regularly read.
Editor: Thank you for your time, Warrick.