Supply Chains: An Intrinsic Part of Your Risk Framework
Your supply chain is most likely an instrumental part of your business’s unique value proposition.
While supply chains have been vital for many years, their significance has grown even further recently. Technology changes have allowed companies, and their suppliers, to change their business processes and their working relationships radically as new commercial opportunities and risks emerge.
Understanding where a company ends and where its supply chain begins can be quite hard.
Responsibility for issues may not always be clear to everyone involved. This is especially the case when companies allow suppliers to make use of their own domain or when suppliers have access to their customer’s proprietary technology and data.
While companies take steps to limit their risk by undertaking comprehensive due diligence and asking suppliers to sign NDAs, there is scope for issues involving fraud, compliance, or cyber risk in such a complex commercial network.
This situation was highlighted in the recent KPMG Fraud Outlook 2022, which explored the experiences of over six hundred business executives in North and Latin America. Although the issues were specific to these regions, the lessons highlighted can be transferred further afield.
The headlines are stark.
• 71% of respondents had experienced fraud in the last 12 months.
• 83% had experienced a cyberattack.
• 55% had experienced a significant compliance issue.
One of the issues highlighted in the study was how supply chains are an intrinsic part of the risk framework and companies need to be aware of this. The research bears out the value, as well as the risks, of managing a complex supply chain framework. This complexity extends, not only from your direct suppliers, but also to their supply chain too. Given the widespread use of business applications, for example, it means that data and technology providers may be part of your deep supply chain, without you having any awareness, let alone visibility.
Does your supply chain offer opportunity for threat to your business?
Each of these levels in your supply chain offers scope for fraud, compliance, or cyber risk, which could threaten your business. The challenges faced by any business looking to enhance its third-part risk management (TPRM) capabilities is that it cannot dictate terms to its suppliers – it will always be a case of negotiation. Clearly there is an incentive to make the process as easy and non-intrusive as possible for all concerned.
What is the best way to implement a TPRM framework?
Your TPRM framework should ensure your supply chain aligns with how you manage your own fraud, cyber, and compliance risk. SaaS-based solutions lend themselves well to this type of issue. They seamlessly blend ease of access and deployment, security and functionality, in a way that allows a range of disparate businesses to adopt a similar working model that works for everyone.
The ideal solution allows companies to centralize much of their supply chain information in systems that are easily accessible to anyone who needs to see it – typically procurement, risk management, and the operations team. This allows those closest to the day-to-day management of the supplier relationship – usually the operations team – to have full access to any contracts, risk assessments, their vendor risk policy, and other relevant documents, while also having complete visibility of issues.
From a fraud, risk and compliance perspective, this capability allows a company to challenge its suppliers – even into the 4th or 5th level – about issues like:
• Staff vetting
• Sanctions monitoring
• Fraud prevention
• Modern slavery issues, and more.
These can compromise the ultimate customer’s own requirements. It allows for remediation efforts to be captured, monitored, and reported. Additionally, it enables proactive monitoring of new issues that might impact a supplier’s ability to manage its fraud, compliance, and cyber risk management.
Effective Third-Party Risk Management
A TPRM framework is vital for monitoring your internal operations and those of your vendor network. Mitratech’s GRC platform offers cutting-edge capabilities that are fast to implement and easy to manage. Our technology gives you the support you need to achieve your business goals.