Operating a world business right now requires effectively managing a network of third-party partners that provide product parts, run operations in international markets, operate call facilities, or act as outside consultants or agents.
The vast array of capabilities and specialised skill sets of a well-maintained third-party network makes operations simpler for each the group and its customers. However many organizations, from small businesses to multi-national corporations, can hardly ever afford the effort and time required in-house to manage these typically advanced third-party relationships.
Because of this, the risk of unethical business practices, bribery and different enterprise corruption potentially will increase if inadequate due diligence is conducted on third-party partners. The ramifications of a scandal related to a third-party partner can simply take down an organization, resulting in such risks as a damaged repute and model devaluation, to regulatory violations, legal proceedings and possible fines and jail phrases for directors. The only way to fully protect the corporation’s assets, due to this fact, is through a powerful and viable third-party risk management program.
Building a third-party risk management program is not a passive process. It requires time and effort on a continuous basis, because the risks associated with third-party partnerships consistently evolve.
Consider the events of this previous summer, throughout which the legislators of three separate nations signed new compliance rules and standards into law. Without a doubt, in case your group’s third-party risk management program is unable to quickly adjust to those new laws (or will not be designed to anticipate future legislative movements) your organization is really at risk.
Cutting corners: not well worth the risk
Still, far too many organizations are willing to tempt fate by chopping corners on development and implementation of their third-party risk management program. Definitely, building a powerful risk management program requires a significant funding of time and resources (both internally and from the outside), however the penalties of not doing it right may very well be dramatically severe.
One way organizations try to cut corners is by counting on outdated or stagnant tools to monitor, detect and forestall risks. Nearly always, hiring outside trade professionals with proven track records of successful due diligence experience is necessary.
Relying too closely on “desktop” due diligence is another harmful shortcut. Desktop due diligence is a crucial initial step of the investigative process, involving background checks, lien searches, regulatory filing investigations and environmental reports. And while it is a vital part of any effective due diligence program, it’s not practically enough to thoroughly consider a third-party.
Actually understanding a possible partner’s business requires a considerable amount of time spent face-to-face with the outside group’s leadership, operations management and even current customers. This “boots on the ground” process will detect potential risks which are often hidden from a distance, and undetectable via web-based discovery tools.
The “boots on the ground” approach additionally helps to ascertain a relational dynamic required for ongoing negotiations and provides clear perception into two of the fastest-growing points in third-party risk administration: bribery and labor management.
Bribery as a compliance challenge
Anti-bribery and anti-corruption compliance is a fast-moving target. New anti-bribery laws and rules are being decreed around the globe at a relentless pace. Complicating matters additional, many countries could have laws in place but lack the ability to adequately enforce them. When this is the case, the responsibility falls to your organization’s due diligence program to ensure detection and protection.
High profile investigations in recent years have contributed to the rapid emergence of bribery and corruption as a societal issue. Never before has such a distinction been drawn so dramatically on a global stage between people who engage in bribery and those who undergo as a result. Any group that finds itself blended up in a scandal involving bribery has more than a legal mess to contend with. It has a long battle to win back the trust of its shareholders, staff, clients and the public.
Conducting adequate due diligence surrounded by such varying factors is work that have to be performed in person. Gaining perception into a possible partner’s company culture requires a level of immersion with the group’s leadership, administration and staff. When it involves evaluating bribery risk, some warning signs can only be discovered on-site.
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