According to the Stanford Law School FCPA Clearinghouse, 16 of the 19 enforcement actions in 2019 involved bribery schemes that relied on third-party intermediaries. Then the coronavirus emerged on the global scene and a host of supply chain vulnerabilities were revealed. As organizations come to grips with the ‘new normal’ - and anticipate the ‘next normal’—the need for comprehensive third-party risk management, or TPRM, is greater than ever.
The combined economic and personnel challenges of operating under a global pandemic, however, mean that resources are being pushed to their limit. How can data and technology accelerate visibility into emerging risks so you can work more proactively to mitigate risk? That’s the question we asked in our webinar during this year’s virtual Global Vendor & Third-Party Risk Congress in early October. Now that webinar is available on demand. Here’s a sneak peek at what you can expect to learn.
Building a successful risk management process
Despite this year’s unprecedented disruption, some businesses are thriving. One factor that is a difference-maker is an organization’s ability to identify risk-related events early to allow for proactive, agile responses when an event may impact the organization itself or indirectly through the third parties on which it relies. Due diligence alone is no longer sufficient to mitigate against that wide range of reputational, regulatory, financial and strategic risks companies face.
During the webinar, we look at how adopting a PESTLE framework can help categorize risk into six main categories: Political, Economic, Societal, Technological, Legal, and Environmental. By applying this framework to your third-party relationships and weighting risk according to your organizational risk profile, you can prioritize your risk mitigation efforts and apply resources to the most critical risks first. Of course, doing this manually can’t provide insights in real time, so that’s where data and technology come into play. A PESTLE algorithm, for example, helps surface news related to the PESTLE categories in our risk monitoring solution, Nexis® Entity Insight.
Monitoring third parties also enables you to spot signs of financial distress sooner. Case in point? We teamed up with State of Flux on a project looking at 23 failed companies since 2008. Our analysis of more than 90,000 news articles mentioning those companies found that prior to their bankruptcy declarations, we identified early warning signs of financial instability in more than 80% of the companies studied. What’s more, in over 50% of the companies, the warning signs were either ‘strong’ or ‘very strong’ and were clearly visible six months prior to bankruptcy. The ability to see clear indicators of poor financial health early would allow organizations to put contingency plans in place to ensure minimal disruption from the loss of a critical supplier.
Of course, AI-based machine learning algorithms are just one technological advance that TPRM benefits from. Robotic Process Automation can accelerate due diligence and free up risk professionals for higher value risk analysis. Risk-specific datasets, such as PEPs, sanctions and watchlists, can be integrated into in-house TPRM systems.
Find out other ways that data and technology can deliver actionable insights for strengthening TPRM by watching the on-demand webinar today.