A recent survey by Thomson Reuters of 1,132 professionals from organizations world-wide comprised 2.7 million employees and 9.4 million third party relationships in total showed significant failings in responsible behaviour.

The report Third Party Risk: Exposing the Gaps from a U.S. Point of View brought into focus risks such bribery and corruption and modern slavery are brought into sharp focus when you consider that U.S. survey respondents reported that they had an average of 14,036 third party relationships globally in a typical year.

Third party risk statistics for USA

The survey revealed the following headline statistics for the USA:

• Outsourcing benefits and risks
  • 77% believe that third party relationships have enabled them to be more flexible and competitive
  • 79% agree that winning new business is a priority and as a consequence they might breach regulations
• The regulatory landscape and gaps in knowledge
  • 9% are not aware of the Foreign Corrupt Practices Act (FCPA)
  • When questioned about key specific risks, less than half feel they have sufficient knowledge in each category
  • Only 7% feel that they have sufficient knowledge of ultimate beneficial ownership (UBO)
• Due diligence and enforcement
  • On average, U.S. organizations carry out due diligence on 74% of third parties
  • 61% agree that ‘there is a perception that we’re unlikely to be prosecuted if we breach regulations’
  • 96% increased the amount their organization spends on compliance after experiencing an enforcement action
• Third party risk management
  • The main drivers for due diligence are compliance with regulations and protecting the company from reputational damage
  • Only 36% are fully monitoring for all ongoing risks
• Real world challenges: the top three challenges reported by U.S. organizations are:
  • Resource constraints, including budget and time
  • Lack of data available
  • Limited knowledge of the risk
• Expectations
  • 79% expect to increase the time and resources spent on conducting due diligence over the next 12 months
  • 72% believe the personal liability of compliance professionals will rise over the next 12 months.

How to harness the power of data to address third party risk challenges

Clearly the reason Thomson Reuters do surveys like this are to promote their third party risk management and data support services. Normally CTMfile don’t repeat long quotes from suppliers, but here we make an exception because the statement from Howard Presland, Global Head of Third Party Risk contains good advice:

• “Global supply chains are complex and the most critical issues usually appear deeper within the supply chain – further from customer reach and influence.This is why it’s critical that organizations have access to data and solutions that can enable them to detect and assess such risks.”
• “Oversight of third parties is still one of the greatest challenges in managing compliance programs, yet our survey reveals that 62% of respondents only screen tier 1 suppliers, resulting in a lack of data on all business relationships for effective risk management.”
• “This is why it’s critical that organizations have access to up-to-date and in-depth data such as Thomson Reuters World-Check risk intelligence. Using more than 230+ research analysts to search for hard-to-reach information, World-Check risk intelligence provides structured profiles on individuals and entities to enable organizations to identify who they are really doing business with and to understand how the various risks intersect.”
• “For heightened risk individuals and entities, Thomson Reuters Enhanced Due Diligence provides organizations with customizable detailed background reports that include information on adverse media, connections and relationships and ultimate beneficial ownership.”
• “Companies that have a holistic and systematic approach to third party due diligence and work with key solution partners will be well prepared for future challenges and empowered to build more sustainable supply chains.”

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CTMfile take: You don’t have to buy Thomson Reuters products and services, but corporates should follow their advice on how to tackle risks in your supply chains.