43% of third parties do not receive due diligence checks, and 62% of respondents do not know the extent to which third parties are outsourcing work.
Covid-19 poses significant threats to third-party risk management and supply chain stability, potentially exposing companies to fraud and threatening their business operations, according to a new report from Refinitiv.
In its fourth third-party risk survey, Refinitiv highlights the pressures companies face when managing risk associated with third-party relationships.
Despite greater regulation and stronger enforcement action, the report finds that organisations are struggling to gain visibility over third-party risks and take appropriate action.
On average, a survey found that 43% of third parties do not receive due diligence checks, an increase of 6% compared to the responses from a similar survey conducted in 2016.
When it comes to reporting a third-party breach, 53% of respondents would report internally, and only 16% said they would report it externally. Further, 61% of respondents believe that prosecution would be unlikely for breaches of third-party-related regulations.
The report highlights the need for businesses to have clear insight into all levels of their supply chains and the ability to conduct due diligence quickly and easily, particularly during the Covid-19 pandemic.
The survey found that 62% of respondents did not know the extent to which third parties are outsourcing work, and only 15% reported they had sufficient knowledge of the risks associated with pandemic and epidemics.
The survey also found that 63% of respondents agree that the current economic climate is encouraging organisations to take regulatory risks in order to win new business.
On green issues, the survey found that 84% of institutional investors believe ‘greenwashing’ is becoming increasingly common. This is the practice of providing misleading environmental credentials.
“Our report shows that many companies today are not taking necessary actions to protect themselves against the risk of criminal activity and regulatory enforcement,” said Charles Minutella, head of enhanced due diligence at Refinitiv.
“Better data, greater technological innovation and new forms of collaboration are crucial when it comes to reducing third-party risk.”
The full report is available here.
The findings of the report are based on a survey completed in February 2020 by nearly 1,800 global third-party relationship, risk management and compliance professionals in corporate organisations across 16 countries.