COVID-19 is set to have a substantial impact on the risk landscape, particularly in terms of supply chain and third-party risk
Research by Refinitiv reveals that organisations in Asia Pacific are struggling to gain visibility over third-party risks and take appropriate action. The survey found that on average, 44% of third parties do not receive due diligence checks in APAC.
According to the report, in terms of third-party screening, Hong Kong leads the region in third-party due diligence, while Singapore records the poorest performance. As a driver for conducting due diligence, corporate social responsibility and supply chain sustainability are cited as important factors by over a third of APAC respondents.
COVID-19 is set to have a substantial impact on the risk landscape, particularly in terms of supply chain and third-party risk. Global supply chains can create competitive advantages for businesses and cut costs for consumers, but they also carry significant risk. If businesses do not have clear insight into all levels of their supply chains and the ability to conduct due diligence quickly and easily, they cannot hope to mitigate or manage their risk.
Just 18% of APAC respondents - compared to 15% globally - said they understood the risks related to pandemics and epidemics. The figure for China was significantly higher, at 30%, which may reflect the fact that the majority of reported COVID-19 cases were in China at the time the survey was conducted.
“COVID-19 has exposed the fragility of supply chains and demonstrated how critical due diligence is to identify and manage multiple risk scenarios, whether it be country risk, jurisdiction risk, or the concentration risk of over-exposure to vendors or geographies. As a result, businesses are likely to build greater visibility and resilience into their supply chains in the future so they can more thoroughly assess and mitigate supply chain risks and increase actions taken in all aspects of third-party due diligence,” said Phil Cotter, managing director of the Risk business at Refinitiv.
The survey also found that 63% of respondents globally agree that the current economic climate is encouraging organisations to take regulatory risks in order to win new business. The rising importance of green issues is also included the report. When surveying institutional investors, 84% stated that ‘greenwashing’, by providing misleading environmental credentials, is becoming increasingly common.
“As regulators increasingly focus on sanctions, corruption, sustainability, and human rights, companies must upgrade their risk management capabilities in order to continue to reap the benefits from working with third parties”, said Charles Minutella, head of enhanced due diligence at Refinitiv. “Our report shows that many companies today are not taking necessary actions to protect themselves against the risk of criminal activity and regulatory enforcement. Additionally, the sentiment toward ongoing monitoring and reporting of breaches highlights the need for more overall due diligence resources, education and approaches. Better data, greater technological innovation and new forms of collaboration are crucial when it comes to reducing third-party risk.”
The findings of the report are based on a survey completed by nearly 1,800 global third-party relationship, risk management and compliance professionals in corporate organisations. The research was conducted in February 2020 across 16 countries, including: UK, USA, Brazil, China, India, Australia, Germany, France, Singapore, Spain, Hong Kong, South Africa. Russia, Saudi Arabia, the Netherlands, and Canada.