Supply Chain Management: Risk-Based Due Diligence

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Today, more companies are using third-party suppliers. Does using them make your company more or less exposed to compliance failures and brand or reputational damage? The recent increase in corruption investigations and indictments of companies that used third parties suggest that the answer is more. This panel discussed risks associated with third parties, and addressed questions that boards and companies should consider. Is placing trust in the hands of a third party, a risk that companies must take to do business in today’s global economy? Or can a company take steps to effectively and significantly reduce this exposure through a risk-based due diligence process, coupled with contractual protections, oversight, training, and other means?

1. As globalization increases, so does use of third parties in company supply chains. A recent survey by NAVEX Global showed that 45 percent of respondents are experiencing problems with third parties, and such problems could cause brand damage to the companies. Nevertheless, 25 percent of respondents plan on increasing their use of third parties in the coming months.

2. It’s incumbent on boards to know who is managing the supply chain risk and where the high risk links exist. Also, having a working knowledge of entire export and import supply details is paramount.

3. Doing a risk assessment of the supply chain is an important element in third-party review. Boards should do a crisis audit plan for the supply chain, and question if a crisis drill has been executed.

Andrea Bonime-Blanc
CEO and Founder, GEC Risk Advisory LLC

Randy Stephens
Vice President, NAVEX Global

Carl C. Straub Jr.
Vice President and General Counsel, FLIR Commercial Systems Inc.

This summary provided by PricewaterhouseCoopers.

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