From a third-party due diligence perspective, what are the challenges and opportunities for clients in the next 12 months?
There are many different challenges and opportunities for clients – all of which are influenced by their size, the sector they operate in, whether they operate across multiple jurisdictions, and the regulatory environment.
In terms of challenges, three important ones to consider are the organisation’s risk appetite and risk requirements, the cost of a solution, and the culture required to make it work.
Risk requirements - every organisation will have a different risk appetite. You should be aware about the risks your business faces and the actions necessary to mitigate them – this includes the risks associated with doing business with third parties.
There are so many ways - reputationally, financially, and operationally – that third parties can impact your business and your ability to provide your customers with products or services. When onboarding a third party, organisations need to be aware of the risks. For example, are there allegations of bribery or corruption? Are they the defendant in lawsuits? Do they adhere to modern slavery requirements or are there allegations of employee discrimination?
In recent times the number of risks has expanded to also include areas such as cyber and data security and ESG. Further, as the business grows, its risk requirements may change too.
Cost - The cost of implementing appropriate and relevant third party risk management and due diligence programmes, processes and systems is also a constraint. This can mean that the work becomes reactive, i.e. it is addressed when a problem is discovered, rather than proactive, which gives the organisation the opportunity to take a holistic view and approach in a much more thoughtful and measured way.
Culture – It may seem at times that commercial priorities can diverge from those associated with risk and compliance. Therefore, assessing risk can require a cultural change within an organisation so that its importance can be addressed with the due care and attention it deserves.