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It’s undeniable that the challenges of the past few years have transformed how businesses operate, and
that transformation extends to third-party risk management in a big way. The goals of third-party
management have shifted and the obstacles have changed, yet many leaders are using an outdated
mindset and inadequate tools to navigate this brand new landscape. As we move forward in the new
year, we are going to see just how crucial it is to redefine the approach to third-party risk management
to meet the requirements of today’s global economy.
The expansion of the third-party definition
Decentralization has altered the fundamental definition of what a third party is, to the point where
many risk managers are frequently unaware of the current extent of their networks. Leaders must look
beyond the traditional roster of vendors and suppliers, and consider what other intermediaries are
populating their business ecosystem. With the rise of remote work, the hybrid workplace and highly
dispersed customers, there are more connections and partnerships to manage–and more regulatory
concerns to consider as many of them may operate in different countries and jurisdictions. This
monumental shift means it is more crucial to gain complete visibility into the full supply chain, yet also
more complex.
Management is no longer the single marker of success
Supply chain and third-party risk management has traditionally focused on keeping product moving with
the utmost efficiency. Now that ESG is of peak concern and international regulations continue to ramp
up, leaders are also expected to manage compliance with environmental and social requirements while
exhibiting judicious governance throughout their third-party networks. The job has suddenly become a
heavier lift, while many leaders lack the necessary resources to both maintain supply chain compliance
and prioritize environmental, social and governance (ESG) objectives.
The first step in upleveling third-party management is also one of the most challenging, especially if
leaders are expected to use the same tools that have traditionally worked in the past. Determining
exactly who your third parties are and compiling a central repository of each entity is essential to
creating 100% transparency, yet it is nearly impossible when using a series of spreadsheets and other
haphazard documentation. Manual processes are also highly ineffective at facilitating another core
element of the new standard: a collaborative approach.
Collaboration is the key
If a company’s leadership truly cares about ESG, then a binary approach in which some partners are
deemed worthy of association and the rest are promptly dropped is not responsible. With the right tools
that facilitate onboarding, communication and various third-party certifications, leaders can not only
monitor current ESG progress but actively help guide third parties toward greater compliance and
performance.
At Ethixbase, we’ve seen the benefits of instilling a collaboration culture where communication
facilitates progress. When the entities on the other side of a business relationship are able to
communicate quickly and easily, teamwork accelerates the achievement of mutual goals and helps
ensure we get things right the first time.
In the time before Uber became ubiquitous, it had to undergo significant changes in order to meet the
legal requirements of Apple’s app store. Recognizing Uber’s potential, Apple worked with the company
to bring the app up to Apple standards rather than severing ties–leading to a legally sound and
commercially viable end product that met regulation. While Uber is still embroiled in broader regulatory
issues related to working conditions and policies, the roadmap Apple followed to help make the app
itself satisfactory is a model for collaboration in a key area. The ability to work with a partner and help
them into compliance is the mindset that will serve businesses well in the new era of third-party
management.
The new tools of the trade
In order to meet and exceed the new standard of collaborative and ESG-based third-party network
management, leaders will need to embrace a new toolset. A comprehensive digital platform like Ethixbase360 will provide three key features to facilitate progress:
- The ability to go through all third parties at scale and establish who is high-risk.
- Automated workflows to maximize efficiency and minimize the work needed to flag and escalate issues.
- Communication and eLearning capabilities to ensure no partner gets left behind if they are willing to
- elevate standards and performance.
With the right tools, we can do more and we can do better by our suppliers, for our customers and for a
more responsible way of doing successful business.
