CSCMP's Supply Chain Quarterly
May 19, 2019
Forward Thinking

Partnering with third-party vendors opens door to business risks, KPMG says

Comment
Study lists top five dangers often posed by outside providers and contractors.    

In order to compete with agile newcomers in the global marketplace, many established companies turn to relationships with third-party providers, but these partners can bring a host of risks as well as benefits, an industry study shows.

Those risks can challenge a firm's legal? and regulatory compliance, information security/ cybersecurity, business continuity, strategic plans, financial viability, and even its reputation, according to the tax and advisory firm KPMG LLP.

Despite those dangers, companies in every sector continue to enlist outside partners to help them manage rising complexity and competition, the firm said. Those third-party providers may range from vendors, suppliers, distributors,? and contractors to brokers, agents, resellers, and contract manufacturers. The exposure to increased risk is worthwhile because such firms have become increasingly crucial to decreasing costs, enhancing customer experiences, hastening speed-to-market, and improving value and profitability, KPMG says.

A careful company can manage the extra risk by staying aware of the most common and pervasive threats, KPMG concludes in a study called "Top 5 Third-Party Risks." "With so much potential damage on ?the line, understanding what to look out for and what practices to avoid is paramount to maintaining good standing with your organization's stakeholders and protecting your company from reputational risk," the study says.

According to KPMG, the five risks generated by third-party partners that pose the most pressing challenge to businesses are:

  • insufficient due diligence when onboarding new relationships
  • viewing risk in silos as opposed to integrating risks for total impact
  • absence of ongoing risk monitoring
  • insufficient safeguards for third parties in your network
  • thinking your paper program keeps you safe

To protect against those threats, organizations should enhance their third-party risk management processes by ensuring that they include: clear roles and responsibilities, consistency, connectivity, and full execution, KPMG said.

Join the Discussion

After you comment, click Post. If you're not already logged in, you will be asked to log in or register.


Want more articles like this? Sign up for a free subscription to Supply Chain Executive Insight, a monthly e-newsletter that provides insights and commentary on supply chain trends and developments. Click here to subscribe.

We Want to Hear From You! We invite you to share your thoughts and opinions about this article by sending an e-mail to ?Subject=Letter to the Editor: Quarter : Partnering with third-party vendors opens door to business risks, KPMG says"> . We will publish selected readers' comments in future issues of CSCMP's Supply Chain Quarterly. Correspondence may be edited for clarity or for length.

Want more articles like this? Subscribe to CSCMP's Supply Chain Quarterly.