Third-party relationships – how in control of them are you?
When your business relies on third-party suppliers or service providers, your exposure to risk multiplies.
Businesses are increasingly relying on third parties to carry out vital business functions. Processes and assets that were once housed internally are now housed outside the business but nonetheless, must be effectively managed. We find that the risk of non-compliance with agreed service levels by suppliers, sub-contractors, franchisees or service providers is often overlooked. However, using third parties to carry out vital business functions opens up companies to numerous new risks and potential service, compliance and other failures that can lead to loss of revenue, fines and reputational damage.
It is, therefore, important that businesses document and monitor third-party risks. Tips for going about this are:
Conduct an inventory of third-party activities ranked by risk factor, including value, contract/regulatory complexity, significance of the supply/service to your business and the potential for reputational damage to flow from third-party actions. Do you have adequate contracts or agreements in place for all key third-party supplies or services?
For those third parties exposing your business to the most risk, develop a proportionate process to manage each risk. Develop a contingency plan in the event of a loss of third-party operations or a reputational incident.
Establish clear rules to hold third parties/vendors accountable and measure their performance on an ongoing basis.
If you have concerns over the management of your third-party relationships, please contact your local Findex adviser