Almost nine in 10 (87 percent) organizations have faced a disruptive incident involving third parties in the last three years, according to a survey from Deloitte. Such incidents can include loss of data by a third party, or failure to deliver a service or product on time. The Deloitte survey also highlights the increasing frequency and impact of these disruptions, illustrating the significant need for organizations to invest in better governance and risk management related to third parties.
Of the organizations surveyed, nearly all (94.3 percent) felt low to moderate levels of confidence in the tools and technology currently used to manage their third party risk, with similar sentiment expressed in supporting risk management processes (88.6 percent). At the same time, 73.9 percent of respondents believe that third parties will play a highly important, or even critical, role in the year ahead. This is up from 60.3 percent a year or more earlier.
Kristian Park, partner and global head of third party governance and risk management at Deloitte, states: “With reliance on third parties set to grow, now is the time to address the ‘execution gap’ between risk and readiness. The impact of third party incidents ranges from reputational damage, regulatory and data breaches, through to actual lost revenue and future business. Increasing frequency of third party incidents, some high profile, has driven a shift in motivation of organizations to improve their risk management. Third parties are increasingly seen as a route to gaining competitive advantage. They are often viewed as trusted advisors who bring in specialised skills or knowledge. It is therefore also important to recognise the opportunity that third parties create for organizations.”
The 2016 global survey on third party governance and risk management is based on the responses of over 170 senior members of management from a variety of organizations, the majority of which had annual revenues in excess of US$1 billion.www2.deloitte.com